Continuity mistake: When Gunn is talking to Wesley near the start of the episode, he mentions that he's tracked Lindsay down, and that he's been living under the name "Doyle", and holds out the lease of his apartment. There's a close-up of the lease a few seconds later, in which the name "Lindsay McDonald" can be seen.
Answer: Everybody including Angel saw her. After helping them and then being left alone to talk to Angel, Cordelia says that the Powers That Be let her come back one more time to help them. After Angel gets a call saying that she died, he realises that it was her spirit that was helping them the entire time.