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A general rule in the 'Buffyverse' is that werewolves turn into a wolf for three nights a month. Another rule is that the werewolves look crappy. But thankfully at the start of this episode, a clever Wolfram & Hart scientist guy ('cryptozoologist' is the term they use) comes along and explains that this particular werewolf is a rare breed of 'Lycanthropus Exterus' which means a whole new biped design that doesn't suck. Yay!
In the episode "Unleashed", you only see the werewolf in brief flashes and low lighting, which makes it more convincing (not that the makeup isn't great -- see second photo down). The transformation scenes are pretty well done, but short. Overall, I'd say the werewolf theme is handled pretty well here, with some interesting ideas and cool dialogue, including a scene where the crypto-scientist-zoo guy runs off a list of people who might kidnap a werewolf -- "There's the sacrificers, wackos who want to rid the world of abominations. Werewolf packs looking for new recruits ... then there's the paranormal sporting groups, vampire hunting in eastern Europe, that kinda thing ..."
Nina the werewolf returns in the hilarious episode "Smile Time", and turns into a werewolf for a great scene in which Angel, who has been transformed into a puppet at this point, almost gets ripped to shreds (see bottom photo). Nice doggie ...