He means it as more than a compliment, truly. Deacon may be a liar, but he is never dishonest about his feelings on particulars. In any case, he thinks Danse is way better off without those Brotherhood assholes, and the ex-paladin can probably sense that sentiment, too.

Shameful and humiliating aren't even adjectives he'd use to describe what he saw. Deacon was having his own internal crisis at the time; as he so frequently does when faced with a situation similar to Danse's. It's difficult for him to remain all smiles and snide remarks when he thinks about Barbara; a thought he similarly pushes from his mind. But while trying to distract himself from those thoughts, others sneak in...

"I dunno, seems a bit clunky..." he replies, his voice somewhat distant. He's a bit preoccupied with a memory that keeps trying to sneak it's way in. One he's blocked away by repeatedly reciting every word he can remember of 'War and Peace' in his head.

"Sorry-- What was that? Got a lot on my mind."