He loves her like a daughter. In this chapter its pretty much explained that the king does know and is aware, but he's likely hoping with love and care she'll go back to how she was. The king is a good parent who is clearly trying to prioritize his children and their happiness, even if tough love might have helped more. Was it ever stated what happened to the queen? Its been awhile since I've reread the whole thing, but if the queen died when the prince was young, then the king might have been trying to "compensate" for that with more (almost blind) love. Like he's trying to give two peoples worth of love. He's a good person, and seems to be a good king, but his love for his children blind him in both an almost good way, and (in this instance) a very bad way. I've seen this before from a few other manhwa dad's, but I'm blanking on specific ones right now. Anyway that's all just my conjecture from what little we've seen and heard of the king.
I wonder if the king is aware of Diana’s behavior… I mean how can he not when he’s aware of the whispers of the nobles AND the peasants like does he not have ppl reporting to him about her?!? If he does know, why is he so tolerant of her? If he doesn’t know, then why not question where all these rumors are coming from? I hate his blind affections for her