No surprise, the narrator admits that he is about to go on another tangent. He acknowledges that it's a literary sin to make so many diversions, but he hopes that it will be a guilty pleasure for both himself and the reader.
First, he compares the innovations in battleships to the introduction of gunpowder into the military. Back when gunpowder was introduced, the knights scoffed at it because they were so into the idea of honest manly fighting, swords clashing and whatnot.
Yet the narrator thinks it's possible to acknowledge the value of military innovations without undercutting the virtues of the past. He refers to the old wooden ships as a "poetic reproach" to the new iron ones (4.3).
In his last battle, Lord Nelson, perhaps out of pride and stubbornness, more or less advertised his location on the ship the Victory. If you're a utilitarian (greatest good for the greatest number), then you might condemn such vainglory, and think that maybe if it weren't for his King Kong size ego, Lord Nelson could have saved a lot of lives (not just his own).
Our narrator, though, thinks that the "might-have-been is but boggy ground to build on" (4.5).
He points out that the name "Wellington," the man who won the battle at Waterloo, is not so well known as "Nelson" for the very reason that Nelson was proud and foolish enough not to disguise his whereabouts at Trafalgar. Wellington may have been more circumspect, but he's less famous for it.
Before going into Trafalgar, Nelson wrote down his last will and testament, in which he recounts all his military glories. Again, it's easy to condemn him for having a big head. But the narrator wisely points out that at least Nelson acted out his epic, unlike the poets who simply record the epics of others.