"I find her interesting because...she sleeps above her covers..."

Dana was levitating above the bed, Exorcist-style, in an earlier scene. That's how I always interpreted the joke.

Setup: "She sleeps above her covers." That seems like a curiously uninteresting reason to like someone.

Punchline: "FOUR FEET above her covers!" The lady can levitate over her bed! Now THAT'S fascinating!!

There is a concept that if you sleep under the covers, you are more insecure and need the covers to not only keep you warm but keep you safe. Like when you're a child and your parents "tuck you into bed". There's that feeling of security, like being wrapped up safe and warm in the womb.

However, if you sleep above the covers, it's an indication that you don't need the security, because you're "self-secure". You have no insecurities, you're more outgoing and open to adventure.

So, there's that bit of "sexual freedom" that can be culled from the knowledge that someone sleeps above the covers, coupled with the fact that she does literally levitate above the bed.

"She sleeps above the covers", in the normal world, means that she sleeps on top of the blankets/sheets - not hiding under the covers. This is the ambiguity that is exploited to make it a joke.