Complex sentence: Wit refers to the serious or distressing in a humorous way, rather than disarming it; the thoughts remain distressing, but they are "skirted round" by witticism.
Split into simpler sentences: Wit refers to the serious or distressing in a humorous way, rather than fully disarming it; the thoughts are partially defused. The thoughts retain a portion of their innate distress, but they are "skirted round" by witticism.