If you notice Spike's voice over during the flashbacks, it doesn't seem to quite match the real events. For instance, the way that he said "I had to get myself a gang" implies that the gang was his, not that he was the lowest member of someone else's. When Cecily told him that he was "beneath her," it's really doubtful that he included it in his story. In fact, it's almost certain that the whole series of events leading up to his turning was sipped over in his narrative, and that the real events were being shown in order for the audience to see the difference. That made Buffy's statement that he was beneath her hurt even more than the actual words and rejection did, because it brought back painful memories that he had been trying to suppress for well over a century. That was why he actually cried in the alley, and why he planned to use the shotgun (even more irony there: Buffy's would be murderer becomes the one who tries to comfort her, and even offers whatever help that he can give). The same thing happened again in Season 7, when Buffy told Wood that "it's the mission that matters," repeating the words of his mother, which, once again, she would have no way if knowing, and again, it's said to someone she describes as being either her "friend or mortal enemy, depending on what day it is."
