What does that mean? I realize it indicates you are in strong agreement. “Dude, did you see Fred’s hair cut, isn’t that the worst?” “I’ll say!” But how does it mean that? It seems even odder if you drop the contraction:
I wonder if it’s akin to ‘I say, young man!’? A person trying get another persons attention.
(I’m just thinking aloud, be nice, I’ve had a rough morning)
It’s exactly the same as the more current slang term “Word!” It means “I agree so strongly that I would be willing to repeat what you said myself.” In other words, “I would say the same thing, with emphasis!”
“It sure is raining hard today”
[Other person thinking] I agree, in fact I will say the same thing with strong emphasis.
[Other person speaking idiomatically]: “I’ll say!”
English also has the similar idioms “You said it!” and “You can say that again!” which also indicate agreement but don’t make a lot of literal sense. According to Etymology Online the former dates from 1919 and the latter from 1942. It doesn’t list “I’ll say” and it’s hard to search for the specific idiomatic usage among a lot of more literal uses of the two words.
By my huckleberry pie, if it sounds out of place maybe it’s because we aren’t in the habit of proclaiming oaths much anymore. If we were oath swearers, instead of just sex and revulsion swearers, “I’ll say” might sound timid.
One of the meanings of “how” is “to a great extent”: “How kind of you;” “How rude!;” “How interesting;” etc. So “And how!” means “and how very much it is.”