Deliberate mistake: While it is established that Angel doesn't age, it's obvious across both Buffy and Angel that David Boreanaz gets older. More unavoidable than deliberate, but still worth noting.
Deliberate mistake: Though vampires are said to possess super-human strength, and are in fact demonstrated to have it, they are often kept confined by the flimsiest of restraints. One distinct example is in season 2 episode 9 when Kendra locks up Angel he is unable to break out despite being held in by nothing but a flimsy padlock. This mistake is pointed out in the DVD commentary as an unavoidable 'mistake'.
Character mistake: Time and time again, Buffy or another of the Scoobies have gone a few metres away from a vampire and talked about them, shouldn't they be able to hear them? Because aren't they supposed to have heightened senses?
Other mistake: In episode "Helpless" in season 3, after the council member bitten by the crazy vampire rises, his bite marks heal. But in season 7's "Lies My Parents Told Me," it shows Spike's mother already risen and her bite marks are still there.
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.