This sentence can be misleading and has to be interpreted like :

“Si encore” could be replaced here with “A la limite, s’il s’agissait” which could be translated as “If it was only about making them try takoyaki”

“Je ne dis pas” means “Why not” here.

I would then translate the whole sentence as : “If it was only about making them try takoyaki, why not, but they would never eat raw octopus”.

To note : “Si encore” is an expression that has to be followed by something like “pourquoi pas”, “je ne dis pas” or something similar.

You could translate “Je ne dis pas” by “à la limite” or “pourquoi pas”.

It means that it would not be too much and it could be possible to do this.

“S’ils jouaient contre les anglais, ils pourraient gagner, je ne dis pas, mais contre les allemands c’est impossible.”

If they were against the english they could win, but against the german it’s impossible.

The idiom

si encore …, je ne dis pas

are only the 2 first parts of the complete idiom :

si encore …, je ne dis pas, mais … .

The idiom does not specifically use “Je ne dis pas“. In the context of your sentence it simply means “there is no issue then”.

The basic idiom is

si encore …, …, mais … .

The meaning is quite simple, let’s take a simplier sentence

Je m’inquiète qu’il rentre aussi tard. Si encore il était sorti tard du travail, j’aurais compris, mais il a fini à 16h30 aujourd’hui!

• Something is going wrong, the first sentence is describing what : “Je m’inquiète qu’il rentre aussi tard“.
• But there could be some reasonable causes that makes it to go
  apparently wrong : “Si encore il était sorti tard du travail“.
• If the previous condition had been filled, it would have been OK :
  “j’aurais compris“
• But it’s not : “mais il a fini à 16h30 aujourd’hui!“

Je ne dis pas
in the context of your sentence simply means “there is no issue”