That's not really a fair analogy, at all, but since you mention it that way... I think it's funny that those who don't want 'big brother' watching in on them in their own homes are totally okay with taking away someone's freedom when it comes to smoking. Smoking is legal, waving your schlong around would be harassment on many levels and would be illegal... except in some social circles, I hear.
Personally, when I have guests over I go out of my way to make them comfortable... any good host would. Besides, I don't have a ton of friends and work to keep the ones I do have. (don't cry for me

) This guy must have a lot of friends, or he doesn't value the ones he does have. Sure it was disrespectful of him to continue something that his guests thought was annoying, but it's legal and it is his house.
It'd be more like if your daughter was having a slumber party or whatever they do these days, and you stayed around playing a cowbell loudly. That's going to annoy the hell out of them, but, hey... it's a cowbell.