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Asalaam
Bukhari Hadith Volume 6, Book 60, Number 80:”You (true Muslims) are the best of peoples ever raised up for mankind.” means, the best of peoples for the people, as you bring them with chains on their necks till they embrace Islam.

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بسم الله

This is talking about the prisoners of war, Islam says "No compulsion in religion" as stated in the Quran, however when we talk about prisoners of war back in those days, if you become a prisoner you would expect to be killed especially since they would be the aggressors "Allah hates aggressors", we Muslims fight in self defence and to ward off aggression, in our case the prisoners are to be treated well and we don't kill them and then after they see the good treatment by the Muslims they enter into Islam.

As opposed to other tribes and nations at the time who would violate their prisoners and mutilate their bodies, so the prophet SAWS is saying we are the best of nations in this regard.

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jazakallah