Zhuang Zhixi was a shrewd man, and he could tell that Wang Xiangxiu had some interest in him.
Actually, this is how relationships between men and women often work - many times, what appears as "not knowing" is simply pretending to be naive. There aren't really that many truly innocent men. Often, playing dumb and claiming ignorance is just an act, allowing them to both enjoy the attention while maintaining their innocence.
Zhuang Zhixi, being a man, understood that many people had this mindset. However, he kept his distance from people like Wang Xiangxiu. Although Zhuang Zhixi shared plenty of sweet words with his wife Ming Mei, he was fundamentally a pure-hearted person. He had a good relationship with his wife and maintained appropriate boundaries with other women.
It wasn't that he didn't understand why Wang Xiangxiu behaved the way she did, but understanding doesn't necessarily mean acceptance, does it?