Ozai's not a cuddly fellow- or very rarely- and some of it is natural, and some of it is him distancing himself from things that either can't benefit him or can only hurt him. He does a lot of the treating-people-like-things thing.

Lan Min isn't really a threat, although she could potentially develop into one. But for the moment, she's little and cute and he's not under outside pressure to produce perfect little soldiers. Internal pressure, maybe, but that's more like force of very bad habit. So, between that and the fact that she's sparking already and he's already determined that she's not going to be allowed to be a headache for him, he's feeling nostalgic.