Pete the Cat is "bananas" for bananas. Bananas in this case is supposed to mean "crazy." So, yeah it means Pete loves bananas. I don't think we ever really know what the trick Alan did with the pimento was, just that it was something amazing and that they (including Chandler) really liked Alan. I might have missed something, too, but I don't think we were ever really supposed to know what the trick was.

The phrase "bananas for bananas" means that the Pete likes bananas a lot. Sometimes we use bananas as an adjective. It's a slang way to say "crazy." For example, here is an example conversation: Matt: "Did hear about the car wreck yesterday? Over 20 vehicles were involved!" John: "That's bananas! I can't believe that!" John exclaims, "that's bananas," meaning he thinks the situation is crazy or unthinkable. In the situation with the Friends show, I am not super familiar with the show, so it's hard to answer this question. I think the "Pimento trick" they are referring to is intended to get the audience to think or imagine what they might be referring to. Chandler's reaction "I'll never look at an olive the same way again," is probably supposed to be humorous, because what ever happened was probably really ridiculous, surprising or even disgusting. You sometimes hear this kind of humor on American TV. It's designed to get the audience to use their imagination and infer what might have happened. Why does Chandler have that reaction? Why would he be talking about something as simple as an olive that way? It is only as far as your imagination will take the situation they are referring to. I hope that makes sense. If there is anything that is unclear, please let me know.

Thank you so much for your replies! They are really helpful!