I'd say 1) is closest. The Duchess basically treats Hyerul as The Only Place In The Galaxy That Matters. That Gryphon guy may be a Big Deal in Other Places, but she is a Big Deal on Hyerul, which *of course* trumps him. If he comes around to complain, she can tell him where to stick it.

>>It's a three-hour walk, and that's if we make good time through the
>>Valley of the Orcs - which I wouldn't count on, because, well, orcs."
>
>... seriously? They still have orcs on Hyeruul?
>
>Place really is trapped in the 14th century. What, is that Valley some
>sort of game preserve? They keep a few thousand orcs around in their
>natural environment so that noblemen can ride in, pop a few with their
>blaster rifles and feel like big men, protecting the stead from
>marauders like their ancestors did in the days when a longsword was a
>piece of high-tech weaponry?

I like that.

>I have to say that the fight with Nax seems a bit... hmm. Perfunctory?
>I know this is just a short, but it felt really superfluous in a way
>that nothing else in the story did; it's like "Well, we kind of
>promised a dragon fight, and Act III needs a big finish to send us
>offstage on, so... here you go." I wouldn't say it's dull, but it's
>just kind of... there. Nax swoops down, Nall kicks his ass, they all
>go watch Corwin and Utena get hitched.

Well, it provides Nall and Umi with a convenient distraction before either of them says something they really regret. I'd say anything below "second actual dragon, hostile" would barely register once they really get going.

And we know Nall is a badass, sure. But with his usual joking, easygoing personality, would we really know how much raw *anger* he's keeping in check over the whole thing, if a convenient outlet for that anger hadn't come along?