Instabilities in two-layer Couette flow are investigated from a small Reynolds number expansion of the eigenvalue problem governing linear stability. The wave velocity and growth rate are given explicitly, and previous results for long waves and short waves are retrieved as special cases. In addition to the inertial instability due to viscous stratification, the flow may be subject to the Rayleigh-Taylor instability. As a result of the competition of these two instabilities, inertia may completely stabilise a gravity-unstable flow above some finite critical Froude number, or conversely, for a gravitystable flow, inertia may give rise to finite wavenumber instability above some finite critical Weber number. General conditions for these phenomena are given, as well as exact or approximate values of the critical numbers. The validity domain of the many asymptotic expansions is then investigated from comparison with the numerical solution. It appears that the small-Re expansion gives good results beyond Re = 1, with an error less that 1%. For Reynolds numbers of a few hundred, we show from the eigenfunctions and the energy equation that the nature of the instability changes: instability still arises from the interfacial mode (there is no mode crossing), but this mode takes all the features of a shear mode. The other modes correspond to the stable eigenmodes of the single-layer Couette flow, which are recovered when one fluid is rigidified by increasing its viscosity or surface tension.