Men of culture recognise each other. When Laffen says "my lover is an elf", Phinia response "it seems to be true?" and I think that's because the statement is both true and untrue due to the split timelines.
Until now I thought that the dwarves were speaking a separate language called the "voice of truth" which couldn't be used to state a lie, but I guess they've actually been speaking the common human language and Dwarves can just smell a lie.
I love the politics of this story, it's so cool that he's trying this cooperative approach with human allies instead of trying to force a brand-new kingdom into existence through war.