That's kind of a joking dialogue about the third character in the story, but might be quite naturally come across in manga, animation or even drama scenarios. I mean, it's not unusual in similar situations, but not quite so in our "raw" daily conversation.

A possible direct translation is "That's not a way of folling him up" or else "I think that's certainly not a favorable comment about him". The first speaker intentionally picks up his negative appearance, and he even adds the second evenly-negative comment about his nature this time, while the second speaker might have been expecting a more positive comment about the third in any sense. This is the situation of the scene.

Really difficult to translate a similar phrase with conveying a subtle nuance of it to non-native readers, but of course, could be a best trial. I may have soon thought of a Japanese phrase you may be aware of, "ageashiwosukuu (揚げ足を掬う)", which I speculated might be more or less close to the original meaning.

I'm not a native speaker of English, so you may well squeeze some more better ideas for translation.

Hope clarified something.

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Note added at 14 hrs (2007-07-30 04:25:47 GMT)
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folling -> following

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Note added at 18 hrs (2007-07-30 08:33:23 GMT)
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Ah, yes, now I come to grasp the situation. That makes it more fun and the joke even joking. Then, the second speaker's tone is naturally more ironic.
I would think of, for instance, "ThANK YOU for compliment!" or something like that.