Continuity mistake: When Buffy and Angel get to Buffy's house at the beginning, Buffy starts to use a first-aid kit to patch up Angel's wound. Angel's arm goes from down by his side to up on Buffy's shoulder between cuts. (It can be hard to see since it's close to the bottom of the frame, but it's noticeable. It seems like they cut out a few seconds to quicken the pace.) She's also a little bit closer to Angel between the same cut.
Continuity mistake: After Giles closes the library for "filing, " we see Buffy grab a crossbow off a shelf. It is upside down when she grabs it. Instantly between cuts, it is right side up. You can tell from the grip thingy that sticks out from it. (It looks like she starts to rotate it in the first shot, but it's instantaneously flipped over in the next).
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.