I don't remember disliking this episode as much as I do.
Look Before You Sleep is not a very good episode. It tries to mine humour from contrasting Rarity and Applejack's personalities, but misses the mark in terms of execution. As far as season 1 goes, this is definitely one of the low points.
This didn't have to be the case, though. Contrasting Applejack and Rarity could have been fairly fun if the two characters were written well and if it was kept friendly enough, but both of those don't happen here. The episode depticts Rarity as being more concerned with appearances than actual functionality, which could make for a nice contrast in terms of clothing but is applied early on to a situation where that is blatantly the wrong way to go. This exaggerates her character's worst elements, and makes her less likeable. Applejack, meanwhile, starts off alright but becomes increasingly grating as she is herself more irritated by Rarity. Rarity is similarly annoyed with Applejack, and their bickering fails to be entertaining.
The two just lob shallow insults at each other. It's really petty, and there's not much of a joke to it. Contrast this with the pillow fight that occurs as one of Twilight's sleepover events, and you can see what's not entertaining about the arguments. The pillow fight is like a light-hearted break from the bickering, as it's fast-paced and features ponies getting smacked in the face by pillows, which is just as amusing as when it happens to people. On the other hand, having to listen to such petty arguing between two ponies who are supposed to be friends is just annoying.
In the last few minutes, though, after Rarity and Applejack have made up, there is enjoyment to be found. Finally the sleepover goes as planned, and character interactions are pleasant again. All of a sudden Applejack and Rarity have some pretty decent chemistry, and while the two aren't contrasted nearly as strongly, it's fun enough to watch these characters just be friends. This episode was never going for that, but I still wish it had at least tried to be more watchable.
I did find some humour at points of this episode, but that happened when it got as far away from the point as possible. Unfortunately, whenever the squabble itself was focused upon, the entertainment value of the episode vanished. This is far from one of my favourites of season 1. That said, it's not a step back in confidence from "Dragonshy", at least. If only it wasn't a step back in quality as well.