Continuity mistake: When Wesley and Cordelia kiss, after a few seconds they freeze in place. Cordelia has her left arm around his waist, we see a shot of her face for about a second with her arm definitely angled downwards, then we cut to Wes' face and her hand's now on his neck. (00:25:20)
Continuity mistake: When Buffy wakes up in the hospital bed you can you can see the black strap of her tank top underneath the gown. Then when she gets out of bed on walk to Faith, and it shows her walking through the hall you can see a white spaghetti top through the gown.
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.