Continuity mistake: Willow is turned into a ghost. Throughout the entire episode, she can't touch anything (can't turn the pages of a book, etc.), yet towards the end when she and Giles go to Ethan's shop, and she leaves, you can hear that she opened and closed the door, even though she can walk through walls and can't actually touch the door. The curtain moves when she leaves too. (00:34:05)
Plot hole: Giles tells Willow to leave him while he extracts information from Ethan on how to break the costume spell. By the time Giles smashes the statue Willow has already found the others, who had left the house where she thought they were and are hiding in a completely different area of the town. No matter how long it took Giles to beat the information out of Ethan, there is no way Willow could have gotten back to the house, realised they were gone and tracked them down before the spell was broken. As a ghost, it is possible she could have happened across them even though they were hiding, but seems unlikely.
Chosen answer: From what we see in the series, certain girls are identifiable as potential Slayers - Kendra clearly fell into this category. The identification method is presumably mystical in nature, but the Watchers' Council are pretty effective at that sort of thing, so they're quite good at tracking down the potentials ahead of time. Not perfect, though - it does appear that Buffy herself may have slipped through the net - certainly she had no inkling of what she was until she'd already taken on the role of Slayer. It is possible, however, that this was actually cultural - an American family would hardly be likely to turn over their daughter to some strange man for 'training', so the Watchers might have chosen to keep an eye on her covertly, whereas some other cultures (like Kendra's Jamaican parents) might be more willing to believe.
Tailkinker ★