Never Kill A Boy On The First Date - S1-E5
Other mistake: In the famous scene where Buffy tells Giles, "If the Apocalypse comes, beep me," she grabs her pager from out of shot. Trouble is, she's standing in the middle of her hall and there's nowhere she could have picked the gadget up from. (00:21:00)
Chosen answer: Angel is saying that he is still jealous and Buffy recognizes that this is his way of saying he wishes that they could be together. That is why they both smile.