'I just couldn't take my eyes off your roses. They really are gorgeous.' 'Oh my, you flatter me. Well, thank you.'
Literal
''Just [possessive-の]your [possessive-の] rose [locative-に] fascinated-[casual しまう-てしまってまして]. Truly gorgeous is-[feminine-こと]'' ''My, flattery [feminine-ねえ]. That [topic-は] thank-you''
Genteel/refined feminine speech between neighbors. お宅 ('your house/you') is a polite reference. 見とれる ('to be captivated by looking at') is the compound of 見る + とれる ('taken by sight'). The suffix ~こと as a sentence ending is an old-fashioned feminine exclamation marker. お上手ね ('how clever you are') is the standard feminine way of deflecting a compliment. それはどうも is a polite set phrase acknowledging without directly accepting.