Yes. The "wieder" here has no good or word-for-word translation.
Let's look at it in detail:
ganz dumm sind sie nicht --> they are not completely stupid
ganz dumm sind sie auch nicht --> they are not completly stupid either
ganz dumm sind sie auch wieder nicht --> they are not completely stupid either. (thus basically the same as before)
The "wieder" here is a kind of particle which can be inserted in statements like above where a thing looks on the surface like it one way, but in detail, or closer consideration, that is not (always or entirely) the case. Thus here "all muggles are stupid" is commonly believed - but indeed, they are not completely stupid either when looking at them carefully.
Different example: "Da musst Du hin zum Ski-Fahren, da schneit es immer" - "Naja, ganz so stimmt das zum Glück auch (wieder) nicht. Aber es schneit genug und ist kalt genug, sodass von Dezember bis Februar immer Schnee liegt" (You have to go there for skiing, it's always snowing there" - "Well, luckily not quite. But it's cold enough and snows enough so that it's always snowy between December and February".