The word 'pathetic' has changed meaning over times.
The modern meaning is something like 'miserably inadequate'.
But the older meaning is a lot more along the lines of 'arousing emotion' (notice the stem –path is shared with empathy).
Over time the word evolved a meaning along the lines of 'arousing pity because of vulnerability or sadness'.
Maybe what happened was the 'vulnerability' part began to be associated with 'inferiority' and so treated with contempt, which is how we get the common modern meaning.
In the context of Peter Pan, Smee is a kind of comical, clueless innocent (for a murderous pirate) who instead of being feared by children is quite loved by them, and the narrator sort-of means 'pathetic' in an affectionate way.