Lies. Fushi could only recreate non-living being, which meant that the prince had died. This implied that Fushi now knew that he could resurrect the dead.
^my theory.
How's he just making these bodies of living people, now? He did it with Chabo+Todo in the prisons too. I doubt it's iron, since iron doesn't really look like people.
I was really hoping that the arc would end with the prince being saved by the technique he was hesitant to tell Fushi about, though.