Why does Jim feel this way about Antonia at this point? What does Antonia's response to her situation tell you about her character?

When Jim learns that Ántonia had a child out of wedlock, he measures her by the same standard as the town folk do. Feeling pity for her and lamenting her lost potential, he compares her to Lena Lingard and Tiny Soderball, who despite their bad reputations as young women, have managed to become wealthy and well respected.

I believe that Antonia's choices have given her the opportunity to live a fulfilled life. Regardless that she is poor and continues to work the land; she is happy. Jim will learn this in Book V.