Well after far more searching and squinting than I'd like to admit, I finally tracked it down -- I've got a LOT of pdfs of old newspapers saved, and I figured it might be in one of the newspapers somewhere around September - November 1864....
From the November 23, 1864 Southern Banner from Athens, Georgia:
“[Sherman] took the little child of my friend in his arms and patted her rosy cheeks, calling her a ‘poor little exile,’ and saying, ‘he was sorry to drive her away from her comfortable home, but that war was a cruel and inexorable thing, and its necessities compelled him to do many things, which he hardily regretted. In conversation with the lady, he paid a just and well merited tribute to the valor of our arms. He remarked, that it would be no disgrace to us, if we were finally subjugated—as we certainly would be—as we had fought against four or five times our number, with a degree of valor which had excited the admiration of the world; and that the United States government would gain no honor, nor credit, if they succeeded in their purposes, as they had thus far failed, with five men to one. He regarded the southern soldiers as the bravest in the world, and admitted that in a fair field fight, we could whip them two to our one; but he claimed for himself, and his compeers, the credit of possessing more strategic ability than our generals. ‘You can beat us fighting madam,’ said he, ‘but we can out maneuvre you; your generals do not work half enough; we work day and night, and spare no labor, nor pains, to carry out our plans.
Referring to his evacuation of the trenches around the city, he asked the lady if they did not all think he was retreating, and when she replied , that some did think so, he laughed heartily at the idea and remarked, ‘I played Hood a real good yankee trick, that time, didn’t I?’ He thought I was running away, but he soon had to pull up stakes and run himself.’"