They wouldn't understand the sentence when reading it, but may when listening to it spoken naturally, with correct tones, stresses and pauses, if they're already familiar with all three uses of the word "buffalo". Not many people know of the city Buffalo, or use the verb "to buffalo" so that one's iffy. Most people speaking it would use the word "which" to introduce the restrictive relative clause to make themselves better understood. To ensure native English speakers not familiar with all three uses of "buffalo" understand it when reading it, many people would write it "Buffalo-buffalo, which Buffalo-buffalo buffalo, buffalo Buffalo-buffalo."