I think Blackbeard probably respects that Buggy's able to draw some very loyal pirates to him. I think he probably respects that Buggy got two fairly big heavy-hitters to join him, in Mihawk and Crocodile. I think he'd probably respect the level of "charisma" that Buggy has.
But, Buggy's actual fighting prowess? Well...I think Blackbeard's probably smart enough to see through all that. I think Blackbeard would at least suspect that Buggy isn't as physically strong as the other Yonko.
But, Blackbeard's also pretty cautious. I don't know if he'd be willing to bet his life on that. Blackbeard MIGHT overthink it, and think that Buggy might be hiding his true power. Or maybe Blackbeard even knows something about Buggy's Chop Fruit that neither we the audience nor Buggy himself even know about. Given Blackbeard's obsession with Devil Fruits, he might know a secret about the Chop Fruit no one else does. Even if Blackbeard knows that Buggy isn't really as strong as he seems, Blackbeard might know something about his Fruit that could make him a big player. And if that could be the case, I don't know if Blackbeard would want to risk Buggy suddenly "awakening" his full power.
But, Buggy's true power isn't his ability to fight. It's his ability to draw people to him. And his luck. Blackbeard probably at least respects that much. Blackbeard respects the hustle. Even if he may know it's mostly bluster.
Plus, I really doubt Blackbeard wants to try and fight Mihawk fairly. Mihawk alone is probably not worth the risk for Blackbeard. Crocodile...I think Blackbeard could have a chance of taking Crocodile, if he could get him alone. If only for his Devil Fruit. But, not with all of Cross Guild together. Blackbeard might know that Buggy himself isn't that strong, but Cross Guild as a organization more than makes up for that.
I don't know. I could see Blackbeard underestimating Buggy, too. But, I'm pretty sure he has a decent read on him. I could even see Blackbeard hiring Cross Guild to join his crew. Cross Guild IS a business after all. And Blackbeard has the wealth of Hachinosu behind him now. Blackbeard could just PAY Buggy to join him. And Buggy's greedy enough to agree, much to the chagrin of Mihawk and Crocodile.
I think Blackbeard would take Buggy seriously enough, that he'd rather have him on his side, rather than fight against him. Let's put it that way.