Having just come to the realization that he is never going to be able to cash in on Stephen’s talent, as well as, arguably, that Stephen has caught on to him, Mulligan backs away from his scolding and attempts a half-hearted rapprochement.
Something has snapped between them, however, as the handing-back of the snotrag suggests. Mulligan’s complete insincerity about what he is saying to Stephen is also underlined by his immediate contradiction of it. He agrees that Haines isn’t worth trying to squeeze money or support out of, but still continues courting him.
Mulligan’s line about being stripped of his garments refers to the Stations of the Cross, or the “Way of the Cross,” a devotional practice used by Christians, particularly Catholics. This gives you another example of Mulligan’s wiseassery, but also one that points to his sense that he is the innocent victim of Stephen’s role as Artist.