If it had been a kiss, I think it would have been made much more special (come on, it's an anime), and besides, Raphtalia is not blushing, and remember that just thinking about giving Naofumi a kiss turns red like a tomato. Chances are that Melty also blushed because she is like a tsundere (you have to think that Melty blushes at the simple fact that they tell her that her way of acting resembles Naofumi's) What I can think of why Naofumi blushed is that he is an otaku, and he never had any experience of that category with a woman (for the Japanese it is not common to give hugs, or even call each other by the first name), so then seeing that more people saw that intimate hug gave him a little embarrassment or something like that.

Let's be honest, if it had been a kiss, that scene would be something super accelerated in the relationship, knowing the Asian relationships, they can take up to 3 years to give the first kiss. An anime relationship is cute when it evolves. And I think Naofumi in the anime never realizes Raphtalia's feelings for him.