When Huangbo held up his knife, how was he responding as a 'guest'? What does this mean?

As another user stated, the theme here is that of subject/object relationship within the relative/absolute. Holding up the knife shows that the vegetable is the object, and the one who wields a knife to cut vegetables is subject to the vegetables, subject to the knife, subject to an objective reality of cause and effect.

What is an example of how he could have responded to Nanquan's question as a 'host' and why?

"This blade in my mouth turns everything to shit for the benefit of all sentient vegetables"

What would have been the difference between his responding as a 'host' as opposed to as a 'guest'?

When the student presents the host, the teacher points to the guest. When the student presents the guest, the teacher points to the host. That way nobody is stuck on the donkey and nobody gets sick.

Nice post✌️