To be fair, I don’t think Henry could have stopped Mrs. Allen from disclosing how much she paid for the muslin. She did interrupt Catherine and Henry’s conservation so lacking prescience how could he know what she was going to say and when is there an opportunity for him to prevent her? I think you are correct to point out Catherine’s fear Henry “indulged himself a little too much with the foibles of others.” I think Catherine is right and it is a rather discerning observation of Henry and Mrs. Allen but she also sees Henry as kind to Mrs. Allen by being “polite enough to seem interested in what she said” although “she kept him on the subject of muslins till the dancing recommenced.” I think Henry finds Mrs. Allen a silly woman and his indulgence in her foibles is in giving muslin and her opinions a rather exaggerated seriousness which Catherine can see but to which Mrs. Allen is immune:

“And pray, sir, what do you think of Miss Morland’s gown?”

“It is very pretty, madam,” said he, gravely examining it; “but I do not think it will wash well; I am afraid it will fray.” (Ch. 3)

I agree with CarolTS that Henry is amused at Mrs. Allen but IMHO he is kind and rather patient with her monopolizing his attention, he does not attempt to make her appear foolish and she appears to be made happy by his attention. I think Henry did endear himself to Mrs. Allen. Is Henry redeemed a little in your eyes?