You are torn between choosing to lie gloriously or confessing humbly, and mentally flip a coin.
4 -> C
5
As you bring up your personal acquaintance with the Princess, the veteran spymaster stops working on the blade and pays proper attention. You lay out the facts - as he is no doubt well aware, Princess Annika is currently within the Queen's castle, and if he's even half as clever as he seems then it's also reasonably clear that she is there of her own free will and not due to some manner of coercion. Szabo nods, having vast experience with the Princess' eccentricities even before having been sent quite literally to hell and back to pursue them.
It's pretty clear then, you get to the thrust of your argument, that the original purpose of this mission, which is to bring the Princess back to the castle, is likely to end in some kind of disaster, not unlike the debacle with the Hell of a Thousand Needles. And, even if the Princess were to be brought back, this would only mean that she continues to be a general nuisance back in Vesperlund. Possibly even disruptive to the Kaiser's peace. So perhaps what is needed is some kind of compromise that's suitable for both sides, yes?
Szabo has leaned forward, almost surprisingly with you so far. Fortunately for you spymasters tend to be pragmatic folk.
A) Let the Princess retire to one of Ortfast's local monasteries - she'd make a great initiate of the Moon and you could totally spin it as a freak incident of extreme chastity.
B) Make the Princess into Vesperlund's ambassador in Ortfast, permitting her to stay in the Queen's court if she promises to behave herself.
C) It was an arranged marriage that started this, right? How about letting the Princess marry into Queen Iouni's house to smooth over the diplomatic troubles?
D) What if you could make the Princess just quietly... disappear somehow?