I'm a beginner but I've been going to a chess club recently and where we play a lot of blitz games.  I was the add man out and was watching another game and realized from the stength of one of the player that he was at about the same level I am (he was getting crushed). 

 After their game was over they asked me if I wanted in and I suggested that I could play against the person in question (who lost) since we were at about the same level.  All of a sudden the tension in the room seemed very unpleasant and I felt like I'd said something terribly rude.

Anyway we played two games and split them so I felt like it was a good decision, but did I break etiquette?  Are comments about another players level (or your own) considered rude?

Most likely the winner feels that he earned the right to keep playing. He probably wasn't happy having to sit on the sidelines and watch. On the other hand, you and the other player can do whatever you want.

Loomis is likely right. Also remember, every chess club, just like every other type of club, each has it's own culture. Mine and yours are likely different. I would guess that whatever "house rule" you may or may not have broken, it's not so set in stone that you are going to be considered a villan or chastised or anything like that there.