Perhaps a flaskback from living conditions in Joss’s mind when Buffy blames her gum chewing habit on a gum gnome i.e. Sid the wiley dairy gnome?
-And that makes me wonder why Buffy would call her fictional dairy gnome after a beloved possessed demon hunter dummy.
OR perhaps foreshadowing to season 6 when Buffy and Xander find a hidden camera planted in in a garden gnome in her front yard and then confronts Spike about it, which then upsets him and leads to him sleeping with Anya, which made matters worse and therefore could have lead to his actions in seeing red.
But this episode was not supposed to make any kind of sense anyways soooo MAYBE its just a fucking gnome for no reason! The mystery that is Joss Whedon’s brain…. or mine … >.<