ooh, that's a tough choice! i have so many favourites that i would find it hard to pick just one as michael is great. although i wasn't much of a fan of season 2 so to choose one moment in seasons 1 and 3, i don't know how i could pick one. i loved don't ask don't tell from season 1, as well as when betty met YETI, kissed off to name from season 3.
My favorite is hands down 2.17 "the kids are alright" followed by episode 1 "The Pilot" and 3.09 "When Betty met Yeti" (you just know about Marcs dreams in this one and you get to see the beginning of the transformation of his character in here... You just see: geez... Marc is indeed better than Betty).