Question: Does the end of this episode get fully explained in series 5? Too long to wait until the DVDs. The only point of confusion for me is what happens to Connor - the idea that W&H can alter memories/history, etc. is fair enough, but then why does Angel cut his throat, or at least appear to?
Chosen answer: Angel does not kill Connor. He disables him then takes him to Wolfram & Hart, at which point they contact a demon who uses magic to create false memories for anyone who has met Connor, Connor himself, and Connor's new family. No alternate reality is created, it was just memory alteration.
Answer: They figured they could root out of the real evil that infects the place and do some good with it. Like an undercover cop that joins the mob underworld.