I enjoyed the episode, I thought it was quite funny, and I thought that the Illyria-as-Fred subplot to the episode was very well done. I was glad that Darla and Dru showed up for one final flashback before the end of the series. I thought it was actually kind of an amusing subversion of the "love-triangle", or "girl as reward for good deeds" tropes- Angel and Spike spend a good deal of time bickering and fighting over who is the better hero, and their respective relationships with Buffy, and then they turn up to find Buffy, and in fact her life has continued without them, and she has moved on.
In truth, I would have been quite happy if this was the canon ending to Buffy/Angel and Buffy/ Spike (added to their respective final scenes together)- yes, they both meant a great deal to her, and maybe one day one of them will be together with her. But for now, she has moved on, and they need to do the same.
I do, however, agree that coming as late in the season as it does, it feels a bit like it detracts from the tension of the final few episodes- Angel starts to grow darker, the team starts to question his actions/ motivations, then suddenly LIGHTHEARTED COMEDY, then back to the darker story again. I get that they had to keep the Illyria-as-Fred story around that point in the season, but they could have placed those scenes in a different episode and moved TGIQ to earlier in the season, IMO. I don't know, maybe they wanted to detract a little from the darkness of the later part of the season.