Even though the Daemon sisters' transformation appears only once in the whole series, it's probably one of the most well-remembered scenes in the whole anime, and it pretty much cemented their status as the Ensemble Darkhorse team.
I WANT YOU TO MAKE BELIEVE IT'S THE FIRST TIME.
After Brief gets his hands on the Ghoststone, the episode cranks into high gear and Gainax delivers the first battle between Panty & Stocking and Scanty & Kneesocks, which is easily one of the most balls-out fight sequences they've ever done.
To elaborate, it was probably their first Let's Get Dangerous moment. Stocking removes her other stocking, as well as her own panties, and gives it to Panty. Both of them proceed to Dual Wield and kick some ass. Chuck gets into the action as well, and delves into some Car Fu later in the episode, too. A small pink hummer vs. a giant limousine. Carnage and awesomeness ensues.
Also, the Shut Up, Kirk! speech from Panty, from the Japanese dub. (Unless you are Brief, of course). The music helps a lot:
Scanty: Halt, angels of the toilet! If you come any closer, this filthy boy will suffer the consequences.
Panty: Go ahead. And while you're at that, I'll blow off that annoying head of yours.
Scanty: You call yourselves angels when you'd just let a human die?
Panty: I can't stop myself from doing the things I want to do. And right now, I wanna crush you. Sorry, Geek Boy.
Brief: Couldn't you at least call me by name before I die?
Scanty: What's wrong with you? Don't angels follow any rules?
Panty: Stupid. Rules are made to be broken.
Note that that "speech" didn't work at all, but Panty & Stocking kicked their asses anyways.
Compare that to the English dub.
Scanty: Hello, there. I wouldn't come any closer, but feel free to test us. Nothing would make me happier than to destroy your mingey rodent boyfriend here.
Panty: Yeah, like I give a shit. Do whatever you want with that turd pie. Maybe he'll distract you. Make it easier for us to stomp your sunburned asses.
Brief: Panty, please! Don't!
Scanty: You'd sacrifice your friend for your own perseverance? You're angels!
Panty: Uh huh. We're also tired, irritated, and over it. Stockin's fucking jonesin' and she can't eat until you two are tits-up! I guess that means killing Geek Wad, too. We had fun, kid!
Brief: At least say my real name before I die!
Scanty: You two are the most disgusting creatures! What angel doesn't have morals?! Hello! This is your friend I'm about to kill! You're kind of supposed to care!
Panty: Uh, no. But straddle his face and give him a last meal.
Scanty: How dare you, you rancorous whore!
"Of The Dead"
When faced with zombies immune to their weapons, Panty kills several of them by throwing a propane tank at them and shooting it.
"1 Angry Ghost"
Panty and Stocking are in Kangaroo Court with a monkey as an attorney. The day is saved when the monkey is electrocuted, giving him a massive intelligence boost and turning him into a Phoenix WrightExpy who proceeds to dismantle the prosecution in about a minute.
"If The Angels Wore Swimsuits"
The volleyball game.
"Help! We Are Angels"
It's a music video with one of the better songs on the already stellar OST. It's just so... relaxed in its awesomeness.
"Once Upon a Time in Garterbelt"
The flashback with Garterbelt's story shows him being involved in various historical and religious events... And also shows he successfully infiltrated the Ku Klux Klan and the Nazi Party, without hiding his race.
Also, he apparently led the July Revolution of 1830, toppling a king of France.
"Panty + Brief"
Panty gets a brief -groan- moment for trying to take on the Demon Sisters solo. But the real crowner goes to Brief, of all people, for actually saving Panty and saying "screw you" to his Arranged Marriage. Who knew Geek Boy had it in them?
This episode managed to make Panty having sex awesome. What did she do? First she appeared from nowhere declaring she would do what she wanted, in this case making love with Brief; then Corset, seeing she was still scared of Brief's Biggus Dickus, started a "The Reason You Suck" Speech that she not only ridiculed by ignoring it, but she scarred Scanty's face by throwing her panties on her; then she sit on him and gave him an erection, something that Corset's bondage had utterly failed in spite of days of attempts, thus endangering Corset's plan; and, finally, by successfully making love with him, she recovered her powers with this act. The only thing that could have made this more awesome would have been Panty saving Brief's from his fall in the keyhole, thus combining a Crowning Moment of Heartwarming with completely ruining Corset's plan.
Since it happens before you learn that it's all an act, Sam not letting a minor thing like a giant hole in his torso stop him from throwing More Dakka out the window.
"Bitch Girls 2 Bitch"
The massive fucking gun. That fires into Heaven by mistake. And calls forth their mother, who saves Daten City using nothing but her legs.