Bilbo's quote: compliment or insult?

[Lalwendë]

"I don't know half of you half as well as I should like; and I like less than half of you half as well as you deserve". This was unexpected and rather difficult. There was some scattered clapping, but most of them were trying to work it out and see if it came to a compliment.

Yes, the Sackville-Bagginses will no doubt have been insulted, but then they imagined Bilbo was slighting them at every opportunity (inclduing his mention of the numbers of guests being invited to match the combined ages of himself and Frodo - one gross) following his taking on Frodo as heir when it ought to have been Otho if following the family tree. The statement is designed to confound; note that some of the Hobbits there do understand it and indeed applaud Bilbo.

Boro is spot on that it would be the way it was delivered that would affect how it would be received. Ian Holm does deliver it in a snappy fashion, whereas I can imgine Tolkien himself leaving a slight pause between the clauses, just enough to give the verbal hint that this is another riddle that must be worked out.