Continuity mistake: At the party where Riley is talking to Buffy by the stairs, when he first comes over there is no one in the corner on the stairs but in the next shot there are two people who disappear two shots later.
Continuity mistake: In 'The Initiative', Riley, Graham and Forrest are looking in through the windows of Stevenson Hall with thermal goggles looking for Spike, they see him walking towards Willow. When we see Willow and Spike seconds later he is still sitting on the bed where he was for most of the scene. (00:37:30)
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.