Rachel Barney offers an interesting take on this passage in her 'Names and Nature in Plato's Cratylus". She sees this passage as a one of a type in which Socrates demonstrates his ability to do what Sophists do (orate, interpret a poem, find an etymology) just as well if not better than the sophists themselves. This then gives him authority in their field which he uses to discredit them later on when offering a different way to knowledge: dialectic/philosophy.

In this context, interpretation of poetry is a sort of appeal to private knowledge. Socrates can't simply dismiss it even if he were to disagree with it, so instead he offers an incredibly wild yet still acceptable interpretation. Once his audience has accepted him as an expert in this area, he is then able to compel Protagoras to give up on poems and engage in dialogue instead. And so it does have the effect of promoting discussion and open debate.