Bewitched, Bothered And Bewildered - S2-E16
Other mistake: Joyce tells Cordelia to grab some bandages for Xander from the bathroom upstairs. Joyce and Xander are in the kitchen and there is a small corridor that leads to the stairs, but Cordelia goes around the other way leading to the living room. Fair enough, Cordelia made a mistake. She isn't that bright. But she returns with the bandages coming back from the living room. Why come downstairs and then go All The Way around through the living room when she could have just walked down the small corridor?
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.