1) initially some were disappointed at their King, and most were just confused
as others have suggested...i suspect the men quickly see it as a sign that
Theoden has regained all his faculties and is indeed a worthy king.
2) I was fooled...briefly. Perhaps Tolkien had in mind Chamberlain and
"peace in our time" when he crafted this dialogue.
3) I think Grima has come to realize he backed the wrong horse as it
were...Saruman is all but through, he ain't getting Eowyn, and his future isn't
very bright. The origins of Grima are murky...i suspect he was a
counselor to the King but perhaps because of his physical appearance and/or
lack of family status he felt he didn't get the respect and honors he deserved,
so was easily seduced by Saruman's promises!
4) Saruman is losing control...and like a cornered animal strikes out in fits
of rage. It may also be a sign of his loss of "magical"
abilities.