Hmmm, there are several episodes that would deserve the title 'funniest ep'.
I guess I would also say the episode you mentioned when Lina and Amelia had to perform the song. It was really hilarious. And that weird mask-Mazoku alone made me laugh when I saw it because it looks so completely ridiculous...
The one in the tower where they dressed up in customes is another candidate - 'Zelga-bunny-chan' and Gourry in his comfy Jellyfish custome were absolutely great in that ep. Not to mention Xellos' cooking skills!
The episode from the first season where Lina and Amelia dressed Gourry up as a girl the first time was one of the funniest, too. And the one in the 'marriage temple' from TRY, yeah.
And I bet I'm forgetting something here. For some reason I didn't find the episode in NEXT that funny where they all dressed up as girls. I don't know.