Heh, yeah, I loved that.
Nanami's smile was creepy. I'm not sure if it's all meant to be a taunt, but even if she's not putting any effort into this, she's certainly enjoying it.
Biting nails bit... damn
Her comment about playing along with the sword hunt, her brother's weakness, and the futility of stances all suggest that she'll confront him sooner or later, as Kraco pointed out. For the sake of trivia, Bruce Lee also commented that stances of traditional martial arts and their set forms were too limiting.
That last bit of the episode was the biggest cock tease.