Throughout the eleven years that Frasier was on the air, I found two of the relationships between the characters to be most interesting: one was the interaction between the two brothers and the other was the slowly building romance between Niles and Daphney.
This episode allowed both Niles' and Daphney's characters free reign as Daphney first taught Niles to dance, and then, when told (many days after the fact) that Niles' date had cancelled, Daphney innocently invites herself to the Snow Ball as "she would love an elegant evening out."
Since 'Midwinter's Night Dream', Daphney and Niles have developed an easy-going friendship (notwithstanding Niles' desire for the 'friendship' to grow into something greater) and so Daphney simply thinks that it would be a blast to go to her first ball while, at the same time, saving Niles after he lost his date.
It is only after they arrive and Daphney sees how Niles' acquaintances are treating him that she gets it into her head to make this snobby crowd see Niles having such a fabulous time at the ball that they stop gossiping about his supposedly lonely existance since his separation from Maris. This comes to a head when she leads a shy Niles out to the dance floor during a tango, which ultimately leads Niles to blurt out his true feelings for Daphney. He is shocked, yet elated, to hear Daphney parry back his sentiments, and the two conclude an amazing dance sequence with a kiss. (Indeed, their presence at the ball is so convincing that it is brought up 3 seasons later in 'To Tell the Truth' when Maris' attorneys cite this ball as evidence that Niles was in love and involved with another woman during his marriage.)
David Hyde Pierce shows just how impressive his acting is during this episode -- every emotion that the audience knows he is feeling is clearly indicated not only through his hilarious dialogue but through his body language; at one point, seen merely through his facial expression alone. He is so good that not only he, but the audience itself, feels the euphoria and then the overwhelming sadness that follows when he and Jane Leeves are back at their table after the tango, and Daphney reveals her real rationale for saying what she did on the dance floor.
Obviously, it will be a while before a greater romance builds between the two characters, but this is an amazing example of the chemistry between the two actors, and it is always a privilege to see David Hyde Pierce in action.