Continuity mistake: A cut scene shows the sun had just gone down right before Buffy heads to the Bronze and Joyce tells Buffy she will make them dinner if she chooses to come downstairs. This would assume it is evening. When Buffy kills Luke she says sunrise is in 9 hours. Considering this episode takes place in March, that would mean the sun would have gone down around 7pm. But 9 hours from sunrise would be around 10pm.
Continuity mistake: When Buffy is shown pulling the secret chest out of her closet with weapons against the vampires, the window behind her shows daylight, but when she steps out of her window it is fully dark. There is also a cut scene right before that shows it was twilight, but there was late afternoon sunlight shining through the windows of her room. It's not possible for the sun to go down that fast.
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.