Where the heck does Sebastian keep all that silverware? o_O
i.e. my original assumption with the phrase "Do you need a knife?" is a knife that can be used as a weapon; and the joke of it is the knives in question are table knives, which are regarded as harmless. Therefore that could have been the joke.
BUT THIS IS SEBASTIAN and table knives are pretty much his weapon of choice, therefore the joke has gone full circle in my brain and it's great.
(Wouldn't really do that to Grell, probably just step on his face)
"Where the heck does Sebastian keep all that silverware? o_O"
My answer is Michigan.
But Grell might have been REALLY mad about it…