So Zap2it's carina mackenzie managed to get some scoop on the developing relationship between Damon and Elena in season 3 from julie plec and here is what julie had to say:
in last week's episode, Damon insisted that Elena admit that she was worried about him, because, as he said, if Stefan does get his act together, Damon doesn't want Elena to forget how close they've grown while little bro has been gone. Their friendship certainly deepened over the summer, though all Elena would admit to was that she cares whether Damon lives or dies. It's not exactly the stuff of romance novels.
"There's yet to be an admission of that chemistry from her part," executive producer Julie Plec said in a Q&A that Zap2it attended on Wednesday. In the Oct. 6 episode, "Disturbing Behavior," Elena's refusal to admit to her feelings for Damon may be addressed."Next week's episode kind of illuminates that a little bit," Plec confirms. "A lot's gone unsaid. There's a big elephant in the room as far as all these fun little stolen moments and romantic banter and their dynamic with each other. It hasn't gone unnoticed with other people."With Stefan continuing to self-destruct (and to other-people-destruct, too), Elena's besties aren't going to let her stay in denial too long. "[As Elena is back] in Mystic Falls trying to pick up the pieces and get on with her life, it's the kind of thing that her friends and her loved ones are going to [point out]," Plec says. "We're going to have some fun with that."
So it looks like others are definately going to be picking up on Damon and Elena's chemistry and we did kind of see a bit of that through alaric last week when he said to elena "do you know what you're doing there?" after Damon left elena's bedroom. Also caroline and tyler dont seem to be buying that elena kissing damon was just a goodbye kiss. So it seems that eyes are being opened to their possible sizzling chemistry.