I think it's somewhat of a tricky situation. I don't think his surprised reaction towards Goku beating up Chappa means much considering Jackie Chun seemed pretty surprised as well, even going as far as to say it could be bad for him once knowing what goku used was far from his FP and getting carried away in the prelims when he admitted going too tough on a random fighter... and we know Roshi was still way above Chappa-o, so I don't think their surprise at Goku's power vs Chappa means they were already outclassed by such power.
But then, we have Yamcha stating he didn't think someone could defeat Chappa-o that easily, which complicates things a little. I like what was said in my manga-copy more, in which Yamcha merely stated Goku didn't even give a shot to Chappa-o, which doesn't lead to such apparent debate, since all we'd be let to then would be their surprise. Can someone check what Yamcha stated in the Japanese anime?
BTW, I'd likely go with an out of Universe explanation here and argue Toriyama still wasn't clear on whether he'd have the main cast considerably outclassing Chappa-o at that moment, and later decided to go with them being also way above Chappa so the Tournament would be more smooth, without having Yamcha and Kuririn already losing their confidence. So, I think the later implications of them being able to do the same outweights what was said by Yamcha there imo, which can even be argued as him still not being so comfortable with the God martial artist being defeated that way.
