She certainly has had time to get used to her sister's relationship with Giles, but I am fairly certain she doesn't dwell on the details of it.

No, you're right. I'm fairly sure Dawn wouldn't have been making that joke if she thought that it might have been true. But she knows that (1) Buffy and Giles were at work and they would try to keep things professional and (2) if they had been in midst of something more than mere heavy flirting, they would have actually locked the door. ;-)

Glad you liked it!