The narrator asks us to imagine what must be going on in Daniel's head now. He's caught between two social spheres – the traditional English society that he grew up in and the Jewish society that he feels inexplicably drawn to.
Daniel feels a little confused and torn. Ever since he was thirteen, he has been convinced that Sir Hugo is really his dad. Now, all of a sudden, Mordecai has offered a different explanation – that Daniel is Jewish. Now Daniel isn't sure what to think.
Then again, it's possible that Mordecai is just seeing what he wants to see in Daniel.
Daniel tries to make sense of everything that's going on. He figures that if he had never met Mirah, he wouldn't have become so interested in Jewish culture and he definitely would not have found Mordecai.
He's also just really afraid of disappointing Mordecai.