Angel was Liam when he was human. He was called Angelus after his sister called him an angel returning to her in Angel season 2. Angelus is latin for "the one with the angelic face" (that comes off of Buffy season 1) he adopted angel after he got a soul to differentiate him from his other half.

Yeah, we got all that.
What I want to know is: in which episode is this informaiton about his sister shown?

Alright! The moment is here! Here it is. The actual reference taken from the text of the show proving that it was indeed his sister that inspired his name:

From 1.15 The Prodigal:

Father: “Be gone, unclean thing! A demon can not enter a home where it’s not welcome. He must be invited!”
Angel: “That’s true. - But I was invited.”
Angel looks to the doorway. His father turns and sees Angel’s sister slumped against the wall.
Dad: “Och!”
Angel: “She thought I returned to her – an angel.”

The first time we learn Angel's Human name, (I can't remember which episode) Lilah was looking through his files and retorted "What kind of a wussy name is Liam, anyway?"

Yeah, season 1 episode "The Prodigal" where the conversation between the newly turned Liam and his father turns to how he had been able to get in the house if he wasn't invited. Liam's younger sister had let him in, claiming Liam to be an "angel that has returned to me". Also in this episode, Kate researches Angel and finds his previous name (Angelus) and that he was documented as the 'demon with the face of an angel'.

Angelus was when he was the true killer vampire he was... Angel is what he goes by when he has a soul. It always says that. They refer to 'Angelus' as if it's a different person when they talk about Angel's past. Angel is Angel, the vampire with a soul. Angelus is the cunning and cruel vampire. I always liked how Darla named him Angelus, Latin for 'angel'. Very funny, and very ironic. Considering he is the exact opposite of an Angel, infact being a Vampire makes him a Deman. Like I said, EXACT OPPOSITES. It's great.

I thought that he changed the name because he was " the one with the angelic face" but i could be wrong lol, i still like his original name..it's a nice irish name : D