I think your problem goes deeper than capitalization. Glanced at me is not and cannot be a dialogue tag. Here, it ends a separate sentence. (This may be why you are confused.) In your example, it works like a dialogue tag, in that it serves to identify the speaker, so like a dialogue tag it can be used in the same paragraph. However since what you have is actually two separate sentences you need to capitalize and also punctuate accordingly. What you have should have been written like this:
As if he guessed what I was thinking, Bob glanced at me. "It should be dead."
You could have two paragraphs, but that would probably lead to confusion.
As if he guessed what I was thinking, Bob glanced at me.
"It should be dead."
It's equally correct that way, but the problem is that readers could have difficulty figuring out whether it is Bob who speaks that bit of dialogue, or the first person narrator.
Or, you could use a dialogue tag:
As if he guessed what I was thinking, Bob glanced at me.
"It should be dead," he said.
or
"It should be dead," said Bob, with a glance that told me he had guessed exactly what I was thinking.
The only time that you don't capitalize dialogue is when it is a continuation of the previous sentence:
"We both know," said Bob, "that it should be dead."
or
"This thing," I said, "it should be—"
"—dead," Bob interrupted, continuing my thought. "How it survived I can't begin to guess."
I don't know if this clears up your confusion or makes it worse.