Thats the only in story reason I can think of why someone who would never ramble on an on within earshot of the fighters, ended up doing so. In fact when Goku fought Frieza, Piccolo picked up on the fact that his very thoughts were distracting Goku. So he put a lot of distance between them and told Gohan and Krillin to do the same. Thats how he behaves around someone he likes and wants to win.
Piccolo knows if he went on and on about some other topic, that Vegeta would likely tell him to stfu. But if he rambles on about how GREAT Vegeta is, he knows Vegeta's ego would want to take it all in. So he does and he goes as far as to say things he knows isn't true. For example that Vegeta isnt one to misjudge his opponents. Piccolo sees its not getting results not resulting in Vegetas defeat so he takes it to the next level and talks about how reformed and how much of a hero Vegeta is now after hes changed. This works, Vegeta hestitates in the critical moment to reassert that he's still a villain destined for hell. Piccolo knows this will work to sabotage him because he knows Vegeta doesnt like that hes reformed. He knows Vegeta went majin to avoid reforming.
Piccolo cant stand the idea of him and Goku getting outdone by Vegeta in battle to the extent of risking everything to ensure Vegeta loses. Same as Merus can't stand the idea of working with Vegeta that hed rather not use his staff to stun Moro long enough for Vegeta to make contact with FsF to split Moro 73 apart. He'd rather DIE on the mere chance that Goku would have the exact right reaction to it to unlock MUI again. Everyone hates Vegeta.