His explanation makes perfect sense given the flow of the conversation. It was a little convoluted but if you watch the video at #60 and follow along closely rather than jumping to conclusions and trying to read people's minds, you can see what happened.
Here's what happened:
Obama momentarily spoke from his critics' point-of-view (which includes the notion that Obama's faith is Muslim) in order to make a point but didn't make it obvious that that's what he was doing; Steph didn't catch it and assumed Obama had misspoken, and proceeded to correct him ("Christian faith"); Obama then realized Steph thought he had misspoken and corrected Steph's misunderstanding but only partially so; then a few moments later Obama gave further clarificatoin that when he said "my Muslim faith" he meant it from the POV of those who were accusing him of being a Muslim and that John McCain was not one of them.
That's convoluted, and if you're already convinced that Obama is a Muslim then it won't be persuasive to you, but that's how it went.
So you say. Are you a mind reader? I didn't see that at all.