@Starbright: In all likelihood we're already at 2nd loop (or more?)
i.e. it wasn't a dream. Lamia met Aquila, something happened and she died, Aquila then use the dragon's power to turn back time, and here we are.
Assuming her becoming a knight is consistent with the past, she probably met him while on the battlefield.
My vote is 1st prince causing it, either:
A) Yandere jealousy at Lamia getting close to Aquila
B) A ploy to frame Aquila for murder of Lamia, because turns out 1st prince is secretly an evil bastard.