Standard spoiler warning: The notes are written for folks who have seen all of BtVS and AtS. I'll be spoiling through the comics as well. Basically -- if you are a spoiler-phobe and haven't seen or read it all, read further at your own risk.
Standard Credits: I've written the material in black; Strudel (aka my Bro) writes in blue; local_max writes in purple. Or at least, that's what they've done when I finish editing and formatting!
Strudel jumps in: There's more to this. Sid mistakes Buffy for a demon. At this point, the audience suspects it's just a mistake, but we find out later that Buffy's strength has demonic origins. Thus, Sid was right, an irony with particularly sharp resonance in this episode where Giles neatly lays out to Buffy et al the supposed crystal clear divide between demons and humans. Maggie replies: Indeed, that sort of layering is the essence of the blurring between predator and prey.
2. Giles observes that the distinction between demons and humans is that demons are driven to kill pure and simple, whereas with humans the drive to kill is more complex. In Lie to Me, Buffy is going to save the day by recognizing that at least one demon (Spike) is driven by something other than the desire to kill. Just as it can be hard to distinguish a demon hunter from a demon, the distinction between humans and demons isn’t so straight-forward either.
Max adds: The complexities of human evil get brought out too in the episode-long red herring of Principal Snyder. Snyder is introduced as having no positive qualities, and throughout the episode he appears at the scenes of crimes. Giles seems to believe that the Snyder is the demon, in one shot late in the episode. But no--Snyder really is just banal, human institutional evil. Of course, this gets flipped again in season two/three, when we discover that Snyder is working for the Mayor, a human who aspires to be a demon (in reverse of the monster of the week here). An amused note: the shooting script lists the Principal's name as "Mr. Miller"!
3. And we get a bit of foreshadowing on this point. Willow is creeped out by the thought that the murderer could be a human and says it’s creepy because it could be anyone, even her. Everyone looks at her like she’s nuts – but as we discover in season 6, she is quite capable of murder.
4. Sid desires death because he’s lived too long. Though many are intrigued by the immortality of vampires, the inability to die is a burden not a blessing. In AtS, season 5, Spike will talk about Shanshu as the chance to become a real boy. That’s what Sid wants here, even though it means he will immediately die.
Buffy/Angel: Sid, like Angel and Buffy inhabits the border zone between human and supernatural. After Sid dies, Buffy holds him tenderly and clearly feels the weight of his passing. Sid and Buffy mirror Angel and Buffy, with the ambiguity of whether they are friends or enemies, Sid’s venture into Buffy’s bedroom and the fact that Sid’s existence in the no man’s land is due to a curse. Also, Angel has a bout of puppet-ness to his credit as well.
Note also how the bedroom Buffy/Sid scene ends with Buffy screaming and Joyce coming in, in a very similar way to what happened in "Angel." Buffy reacts with childlike (and generally uncharacteristic) fear in both cases; we could perhaps surmise that since Buffy's reaction to Sid is rooted in her childlike fear of dummies, maybe some of her strong reaction to Angel in her bedroom has to do with some childhood fears as well. Cordelia notices Buffy's watching Sid, and jokes that the two would make a great couple, who could join the "freak show" together. Freak show--Angel's words to describe Buffy/Angel in "The Prom" (and Buffy's to describe Buffy/Spike in "Wrecked"!). Sid also tries to seduce Buffy, but has rather less finesse than Angel does. Finally, after Morgan's brain is found, Buffy continues to have faith that Sid is the good guy he claims to be, whereas Xander quickly jumps back onto the theory that Sid is the demon, which amply summarizes the divide between Buffy and Xander's assumptions when it comes to Angel. It's interesting how all this occurs in an episode in which Angel is not once mentioned by name.
Slayer as Destiny: Buffy, Willow and Xander end the show doing a piece from Oedipus Rex, the play about a man who cannot escape his destiny. We’re making the turn into Prophecy Girl. Buffy will escape the spirit of her destiny in that episode, but not the letter of it. Season 8 seems to be reopening the question of just how much of Buffy’s life is driven by destiny. The closing scene plays off the title of the episode. It’s worth noting, in this regard that just as Sid is no puppet, neither is Buffy destiny’s pawn.
Strudel: We can go further with these themes. Once again, it's worth attending to the subjects being taught in the obligatory classroom scenes for how they might resonate with the themes of the episode. Previously, it's been biology (giving Buffy a reason to know how to kill praying mantises), biology again (Willow holding the "eye of newt" in Witch) and history (Buffy couldn't care less about history in the episode where she finally kisses the 225 year-old vampire. Max: Not to mention history in the premiere, describing the deadly black plague when the vampires planned to take over town. This time it's history again. (The Monroe Doctrine, in particular, which we could delve further into for tis commentary on complicated stories.) The history in this case is the history of slayers.
Sid evokes the image of the long line of Slayers preceding Buffy, when he mentions that he knew one back in the 30's. Lest we brush past that random mention, he follows that up. "Don't worry about me, sweetheart, I've lived a lot longer than most demon hunters." Then he trenchantly adds, "or Slayers for that matter." We've known Buffy comes from a line of Slayers, and we vaguely know that they have short life spans. Neither Buffy or Giles have really spent much time thinking of it. In fact, Giles only recently thought to look at the previous Watchers' diaries when researching Angelus. So, it's a bit of a sobering reminder of Buffy's poor prognosis. This serves as an immediate foreshadowing for Prophecy Girl and Buffy's awareness of her potentially short mortality becomes an ever more real presence in her subconscious as the series progresses. Nonetheless, I think a case could be made that both Giles and Buffy never learn this history well, and they will suffer the consequences of it down the road.
I'd add that Buffy's awareness of her demise ties in with Maggie's earlier point about Sid's desiring release. Buffy, by "The Gift," wants out of life just as Sid does here. In "Grave," nearly a year after her resurrection, she says that this death was "her time," suggesting that by this point Buffy has accepted her abbreviated death as so essential to her calling that she can't process her still being alive.
The Slayer's Spider Sense. While we're on the subject of Buffy's Destiny, it's worth pointing out that Buffy, likely due to her powers, has a sense of the demonic that is beyond the rest of the Scoobies. In the last episode she mentioned something bothering her spider sense. It happens again here when she tells the other that Sid is alive. She is mocked for it, with Xander laying it on a bit thick when he gets with Sid and demonstrates Sid's wooden puppetness with a humorless sarcastic riff. (Tellingly, after finishing, he puts Sid down and then moves Sid's head to the side, disturbed by the puppet's gaze). The distancing between the Scoobies and Bffy due to her preternatural abilities is already beginning to show. This is a theme that will dominate Season Two and beyond.
The separation of Buffy's powers sensing the demonic is highlighted by Giles' failure to pick up any sense of threat from Marc, who proved to be the demon after all. First he interviewed him, then later even allowed Marc to put him in the guillotine. Buffy's spider sense could have done him some good.
Giles: Max: We see Giles, in this episode, forced into a role he doesn't want--of running the talent show. He chose his occupation (librarian) specifically to avoid having to deal with students, besides Buffy, but now he has to mentor a whole group he doesn't want, and he does a pretty poor job of it. (Seriously, the Power Circle is weak. Sid's right to wonder how Giles got that job.) Eventually, a magician, who is about the only student he has given any real advice to, tries to kill him. I think it's instructive to think about this in regard to Giles' relationship with Xander, Willow, and the other non-Buffy Scoobies: he is never entirely comfortable with them in his life (he comes close with Willow, though she does, yes, nearly kill him), and as much as he cares for them they're not his generation and not exactly his family. There are more hints of Giles' dissatisfaction with his role in the group, when he mumbles how nice it is to have someone besides him deliver the exposition. And yet: he does still bond with Willow and Xander. He is happy to have Willow do research with him, and overjoyed when Xander's Cordelia-related advice happens to work. He didn't sign on for these kids in his life, but he does appreciate them. And it's all three of Buffy, Xander and Willow who save Giles' life this week.
Strudel: Actually, I think we get the first glimpse of what Cordelia is about in this episode. We finally get to see that Cordelia is savvy and self-honest about the social games she plays. She says with disarming candor that her song is a sappy song that will lose its calculated emotional pull if it has to follow Rock and Roll. But, I agree, for the rest of the not insubstantial amount of screen time she gets in this episode, she's played as straight caricature. While much of Cordelia's schtick can be assigned to her real-politic-inspired decision to survive socially by being ruthlessly popular, there is a genuine blindness to Emily's death ("It's such a tragedy for me. Emma, she was, like, my best friend.") that does not rest well with where this character will grow.