From the sounds of things it appears to be a trust issue in his personal relationship though very well could have been him having bad experiences in DF or his server with compliments leading into more and him just reading that as a flag to pre-emptively shut down any attempts. I personally welcome compliments on my play style, skill in a class, dungeon, job, role or trial or on the aesthetics of my character or the glamour I have. I spend a lot of time trying to be the best I can in this areas and probably more time and gil than I should on glamours alone. It's a shame, SayuriHime, you aren't on Faerie because I'd welcome your compliments and would hopefully give you some in-turn.
Now, that's not to say that all compliments aren't flirting - because they very well can be. If I were to compliment a man on his physique that could be entirely harmless (some men just deserve it when they obviously work to look the way they do) but if done a certain way it could be misunderstood as me coming on to them (this has happened before).
Emoting, however, is more straight forward I think. If someone is flirting with you using emotes I think it'll be pretty obvious if they're flirting with you or not. For obvious reason if I'm using /wave or /bow I am not flirting and anyone thinking I am has no excuse for it. However, if I emote certain positioning, stances, eye-batting, or other obviously flirty gestures then, well, I was flirting. Some people aren't as affectionate in-game just like IRL so /hug could come off as something people aren't comfortable with. I generally feel a person out or just ask them if they have an issue with it. Some do, some don't but for the most part people don't particularly care - its a game after all.
Though the couple internal trust issue is a real. A friend of mine doesn't even have a Skype account because his significant other doesn't want him to have one because they're afraid of what he may do with it. Mind you, they have a Skype account. Its mind-boggling to me - as the only time I ever agreed to stop any form of communication with anyone at the request of my significant other was when it was obvious that the party of interest was actively flirting with me.
tl;dr
Compliments can be misunderstood as flirting but in most cases no. Emoting generally isn't flirting unless intended to be. People have issues.