I wish them well in every respect, but I want them to feel that they are Jews.The quote is used to illustrate the paradox of 19th century European elite views towards Jews -- simultaneously expressing (sometimes) warm feelings towards Jews in the abstract, while nonetheless continuing to harbor openly antisemitic attitudes.
This is also reflected in a quote by Wilhelm von Humboldt which Arendt was very fond of: "I love the Jew really only en masse; en detail I strictly avoid him." This was notable because von Humboldt -- great liberal that he was -- was known as one of the great allies of the Jews at the level of political theory. And indeed, contrary to the text of the quote von Humboldt did actually have several Jewish friends. Nonetheless, it reflects the push and pull between abstract commitments to equality (or even fraternity) as against deeply-entrenched antisemitic attitudes.
Interesting side note: The Origins of Totalitarianism was written in 1951. But in 1948, Arendt published in article in Jewish Social Studies titled "Privileged Jews", which presaged some of the content. It's an interesting read: discussing the status of certain elite Jews who in pre-emancipation Europe really did enjoy certain privileges (on account of wealth or education), and how that (partially) privileged status interacted both with antisemitic sentiment in European society and with later moves towards general emancipation.