I actually did just watch it again the other day. With your explanation, the scene does make quite a bit more sense. I had also read that in the book, it described that he was high on something.
Thank you for the answer. It has been a long time since I had it on DVD, and have been able to watch it with commentary.
DammitI wish the message boards weren't shutting down. This is why I loved them. Ask a question, and promptly get an answer.
I thought I could paint it red, but I couldn't find enough goats.

During that scene on the DVD commentary Adrian Lyne says, and I quote: "This is a man so deranged that he eats cigarettes and speaks with an English accent for no reason."
So this is the simple answer: he is really THAT crazy. And I also think in that particular scene the character was high as a kite as well.
And get this: when Humbert shoots the gun for the first time, Quilty is startled, he 'wakes up' for a second, he has that confused/scared look on his face, and you can clearly see how he weirdly looks at the half eaten cigarette (probably thinking "What the hell was I doing with this??").
Watch the scene again and you'll see.

"You don't watch Michael Bay films. They happen to you."