Does Nagito really not understand sarcasm?
Idk if this is just because it's my type of humor but I actually think Nagito does joke sometimes and gets sarcastic but is too awkward to properly show it. I mean, during chapter 1 he had no problem joking around with Hajime about him having "Tsun-Tsun hair" and he has even made more jokes in later chapters like when he told Hajime to "lick his shoes and beg" but said it was a joke after.
Another example was when he asked Fuyuhiko "Are you praising me?" I don't think he didn't understand what Fuyuhiko meant, I think he was trying to infuriate Fuyuhiko more by mocking him and tease him about "praising him." Most likely doing this so he gets a reaction from Fuyuhiko to make the trial easier. But most likely couldn't properly convey the joke either cuz he got interrupted or cuz he is naturally awkward.
The only time I think Nagito didn't understand connotations was when he mistook Mikan's comment on him being clean as a compliment. But for all I know, that could've been another awkward joke that the others didn't get.
From what I can gather so far, I think Nagito actually tries to joke a lot to either get a reaction or to cheer others up, especially Hajime, but ends up only infuriating them in the process