Why does Jon Snow say this to Rattleshirt in A Dance With Dragons?

Question

WARNING: This entire question contains spoilers for A Dance With Dragons.

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After the battle at the Wall, the Free Folk are given the chance to 'bend-the-knee' and be pardoned in order to be spared, including Rattleshirt.

A short while later Mance Rayder is burned upon the Pyre by Melisandre and Stannis.

We later find out that it is not actually Mance, but Rattleshirt who gets burned.

After the burning, Jon Snow is introduced to a subdued-by-Melisandre's-magical-bracelet-thingy RattleMance in Stannis' chambers. At which point Jon has no idea the true identity of RattleMance.

A little bit later on, in the yard Jon defeats some of his men in training, after which RattleMance turns up and challenges Jon to a duel. But Jon says something really curious:

“The big crow can peck the little crows,” growled a voice behind him, “but has he belly enough to fight a man?”
Rattleshirt was leaning against a wall. A coarse stubble covered his sunken cheeks, and thin brown hair was blowing across his little yellow eyes.
“You flatter yourself,” Jon said.
“Aye, but I’d flatten you.”
“Stannis burned the wrong man.”
“No.” The wildling grinned at him through a mouth of brown and broken teeth. “He burned the man he had to burn, for all the world to see. We all do what we have to do, Snow. Even kings.”
^{-A Song of Ice and Fire: A Dance With Dragons, Part One - Dreams and Dust, Chapter Twenty-Eight (Jon).}

Why does Jon say that?

Is it because:

• He knows Rattleshirt is actually Mance?
• He thinks they should have burned Rattleshirt? (Most probable)
• Something else?

Answer 1

NOTE: Answer may contain spoilers for people who have not yet read ADWD.

Adding up to the answer by Justin Ethier:

Jon was simply implying that Stannis should have spared Mance and burnt Rattleshirt instead. He had no idea that it was actually Mance.

Jon did not like Rattleshirt & Rattleshirt did not like Jon.

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Jon's dislike of Rattleshirt

Jon never forgot that it was Rattleshirt who made him kill Qhorin. From ACOK:

“I’ll do whatever you ask.” The words came hard, but Jon said them.

Rattleshirt’s bone armor clattered loudly as he laughed. “Then kill the Halfhand, bastard.”

“As if he could,” said Qhorin. “Turn, Snow, and die.”

Again Jon expresses his views on the man in ASOS Chapter XI:

Rattleshirt, we called him. Treacherous and bloodthirsty. If there’s honor in him, he hides it down beneath his suit of bones.

And yet again in ADWD Chapter XXXI:

"I think not. You do not know this creature. Rattleshirt could wash his hands a hundred times a day but he'd still have blood beneath his nails."

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Rattleshirt's distrust and dislike for Jon

Rattleshirt made it clear from day one that feeling was mutual.

Even after Jon had done for Qhorin, Rattleshirt went back on his word to take Jon in and ordered to kill him:

“Gut him.” That was Rattleshirt, still ahorse. The eagle flew to him and perched atop his bony helm, screeching.

He distrusted Jon's abilities as a Warg:

“He is a warg,” said the Lord of Bones, “and a crow. I like him not.”

As he said in ASOS Chapter VII:

Might be you fooled these others, crow, but don’t think you’ll be fooling Mance. He’ll take one look a’ you and know you’re false. And when he does, I’ll make a cloak o’ your wolf there, and open your soft boy’s belly and sew a weasel up inside.

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So Jon had ample reason to hate the guts of Rattleshirt and wish that he'd have been burnt. Rattleshirt had made him kill a comrade, tried to double-cross him, argued to murder him and also because the man was bit of a tosser really.

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Did Jon not know about the glamour?

He did not know that it was actually Mance. In ADWD Chapter XXXI when Mance reveals himself, this happened:

Jon Snow's grey eyes grew wider. "Mance?"

"Lord Snow." Mance Rayder did not smile.

"She burned you."

"She burned Lord of Bones."

Jon Snow turned to Melisandre. "What sorcery is this?"

So it is clear that Jon did not know or suspect that it was Mance. But he had developed a rather good opinion of Mance and resented his burning. On the other hand he despised Rattleshirt and thought that Mance should have been spared and Rattleshirt should have been burned.

It was simply a sentence spoken out of hatred. Quite similar to what Catelyn Stark said to Jon himself when Jon went to say goodbye to Bran after his fall:

“Jon,” she said. He should have kept going, but she had never called him by his name before. He turned to find her looking at his face, as if she were seeing it for the first time.

“Yes?” he said.

“It should have been you,” she told him. Then she turned back to Bran and began to weep, her whole body shaking with the sobs.

Answer 2

Jon may still hold a grudge against Rattleshirt since in ACOK:

Rattleshirt orders Jon killed, then changes his mind and commands Jon to kill Qhorin, before finally taking him prisoner.