Given the episode Sweet and Smoky, I think this is in character

GARBLE: Can I have your autograph!!?

@Ferrotter  
Directly from the episode’s transcript:  
Spike: Actually, I was orphaned as an egg, and Twilight raised me. So these ponies are more than my friends. They’re my family.
 
This is the line that gave Sludge the idea. If you aren’t going to bother knowing the source material, I’m not gonna bother with your points.

@NavyBr0wnie  
That’s why it sucks to be a taint. You’re always surrounded by an asshole, two nuts, and a dick.
 
 
@QueenCold  
Talk about pure headcanon: There’s no evidence in the show that Spike’s an orphan. His parents may be dead, but there’s no actual evidence of that, not even to the extent of the Apple parents. They may be alive but lost him and never found his egg again, they may have abandoned him, they may have thought his egg was a dud and left it, and they may be alive and not know he exists. Or they may know he exists and don’t care. Or they may have thought his egg was too small and runty, and left him, intending that he die exposed and unincubated. It’s even possible Sludge actually is his father, and just doesn’t know it. Maybe as lousy as he is, Sludge is the better parent, and Spike’s biological mother left him to die. All we know from the show is that Twilight hatched his egg, and from the moment he hatched, Twilight has been his family. We have many alternatives to believing he’s an orphan, and no evidence in the show to choose “orphan” over any of the others. What we know is that he’s an adopted child who sticks out as obviously not Twilight’s biological child, and it makes him feel out of place. It’s at least as likely Spike’s biological parents just abandoned him as an egg, or lost him and didn’t bother to look very hard, as that he’s orphaned.

“I maybe an A-Hole but I’m not a-… uh… Dick”

@Ferrotter  
I was mainly referring to Sludge’s statement of “dragons taking advantage of every situation.” I bet if Smolder reported this to Ember in the Dragon Lands, all of the other dragons would reply with “Oh yeah! We totally do that!”

@Ferrotter  
“Of all dragonkind since likely the dawn of time, he is the one dragon that statement is least accurate for”  
Pure headcanon. You can’t speak for their entire species, especially with how little we’ve seen. Yes, dragons generally kick their kids out during the molt if Smolder is speaking the truth, but it has also been confirmed that dragon parents still interact with their kids afterwards and Smolder’s exclamation of “congrats!” implies the molt is a rite of passage that dragons have positive associations with. They aren’t ponies and shouldn’t be judged by the same cultural standard.
 
“Aside from it being clear that Twilight has been his family, and loved and cared for him since the moment he hatched…”  
Not the point. This was the lesson Spike had to relearn. When I say that Sludge concocted a plan to exploit a child’s starvation for a parent’s love, I’m saying that he was hoping that Spike - as an orphan - was starved enough for a biological parent’s love that they would take Sludge back in. Sludge knew the plan would only succeed if Spike cared about knowing his real father and bonding with him.  
As it turned out he wasn’t wrong. As soon as Spike thought he finally had the chance to get to know his biological father, like almost any orphaned child he threw logic completely out of the window. You seemed to have completely missed this crucial bit, but it was made very obvious throughout the episode that Spike wanted it to be true so badly that he just accepted everything Sludge told him without questioning his sketchy story and exploitative behavior that nobody else fell for. So when Twilight tried to talk sense into him in the most sensitive way she could think of, Spike immediately took that as jealousy and an attempt to take something from him that he’s been wanting.

I can definitely see this happening.
 
I can also see Garble hugging Sludge and not telling him the reason.

@QueenCold  
At no time in his life was Spike ever “starved for a parent’s love.” Of all dragonkind since likely the dawn of time, he is the one dragon that statement is least accurate for. Aside from it being clear that Twilight has been his family, and loved and cared for him since the moment he hatched, he is the one dragon ever whose family didn’t kick him out to fend for himself after puberty. Spike was the adored and pampered adoptive son of pony royalty, had a more real family than most dragons ever would, and the only thing he lacked in life was knowledge about dragon culture. A culture that he has found at every learning opportunity (now including this one) to be cruel and exploitative. Sludge was jealous that Spike had the love and family he himself clearly has never had. Though of course being who he was, he saw in that only the comfy digs and abundant food, not the love he had no use for nor understanding of. Sludge, not Spike, is the love-starved orphan. He’s just older and hardened from it.
 
Indeed, the central point of the episode was that a family like he and Twilight is in every sense a real family. Sludge exploited Spike’s desire to know more about his biological roots, not his lack of love, because there is no such lack on Spike’s part.
 
 
@Red-Supernova  
I don’t think he would have disapproved, and he certainly would have laughed that it wound up hurting Spike’s feelings. If anything, Garble would have looked down on Sludge for not outright trying to hurt Spike.
 
I think what really bothers some people about this episode is how much it brought out Spike’s bad side too, and they have to deflect from that by hating on Sludge. Sludge didn’t do this:  
>>1817417t (merged)  
Spike did.

Really? I think Garble would have approved of Sludge’s methods.

@Ferrotter  
Phoenixes are not established as sapient individuals on par with ponies, griffons, dragons, etc. The phoenixes haven’t displayed any behavior that sets them apart from the other critters in the show that Fluttershy communicates with (and sometimes feeds to each other, which has happened on screen).  
The closest thing to a comparison we can make between a phoenix and a dragon is the comparison between a crow and a human. Crows are smart, but also considered lesser beings by the vast majority of the human population.  
Furthermore phoenixes are self-renewing creatures that lay clutches of eggs, which means their population needs to be culled by a natural enemy. Since phoenixes are fire birds and dragons are resistant to high heat, dragons may well be the only creatures who can safely hunt them.  
It is likely that hunting makes dragons naturally excited because their entire physiology screams that they are predators. They are omnivores in the truest sense of the word. They can digest just about anything, even rocks. Spike enjoyed those baked bads that had all that nasty stuff in them, including worms, without getting sick from them. It is incredibly likely that dragons consume meat on a regular basis and have a hunting instinct.  
None of this makes the egg raid any nicer, but it’s certainly not comparable to homicide.
 
As for Sludge’s plan, there is no possible “no harm, no foul” scenario. The guy stripped Spike of his identity by making him live a lie for his own personal gain and Spike never finding out wouldn’t have made it any better. That would have actually made it worse.
 
I can definitely see the argument for Garble having a higher moral standard than Sludge. Garble seems to value hard work and earning what you want by relying on your own skills. This is consistent with what we’ve seen from dragons. That’s why he was so proud of Spike when he managed to get his claws on an egg and why he gets so angry when Spike gets help or simply lucky.  
Sludge on the other hand has demonstrated that there is no low he won’t stoop to in order to be an enabled lazy bum. The very second he found out Spike was an orphan he immediately concocted a plan to exploit a child’s starvation for a parent’s love.
 
Edit: Garble specifically instructed Spike to lure the parents away from the nest, so how exactly was he doing this to see their reactions?

@SinnerWhoKeepsTrying1978  
Phoenixes are established as sapient individuals with a sense of humor and strong family bonds, and Garble was trying to kill the babies in front of the parents because he got off on their suffering. Sludge just wanted in on Spike’s life of ease and comfort with the ponies. And if he hadn’t been such an incompetent d-bag about it, his actual plan wouldn’t have hurt Spike; he wanted to stay there and effectively be Spike’s father indefinitely. For his own gain of course, but he never set out to harm Spike.

I guess everyone needs a hobby? Just so long as he isn’t killing any of my birds.

Hypocrite

He’s not wrong. Garble’s an asshole but he doesn’t emotionally manipulate children.

Coulda ended it with…  
“And I’m a Garbage Eating Disposal dragon.”

Give it to him!

Well, this is right.
 
Garble: Maybe I dislike Spike, but defrauding him like that is just too cruel.

Now I kinda wanna see this happen