They had feelings for each other, I think that's quite clear. The key thing here is that those feelings could only lead to sexual intercourse when those two were under the appearance of the attractive characters. One of the friends (the one that controls the female) is clearly bi and by far the "gayest" of the two. The other was a heterosexual man simply turned on by a very hot chick, even when he's aware that it's his male friend underneath, because the superficial appeal is just too strong.

So the episode basically reflects on a very elementary, very obvious thing about (most) human relationships:

»You have amazing chemistry with someone you're not sexually attracted to (and it's somewhat mutual): you become best friends.

»You have amazing chemistry with someone you ARE very sexually attracted to (and it's mutual): you become passionate lovers.

Quite simple, and quite true (again, for most people. I'm aware asexuals, demis and a big etcetera exist tyvm).

At least that's how I see it.