Other mistake: When Angel fights with Buffy in the forest you can see that he hasn't got shoes on, just socks. Later, when Buffy goes back to the mansion and Angel is chained up, he's wearing shoes. How did he manage to put them on, if he was in chains?
Continuity mistake: When Buffy is in the counsellor's office she is wearing a yellow kind of gauzey cardigan which alternates between being completely buttoned up to unbuttoned between shots.
Revealing mistake: In the teaser of "Beauty And The Beasts", when Jeff is running through the woods, you can see in the top left corner of several shots a lamp being used to light the scene.
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.