The rough, rugged and haunted Dallas fascinates Pony. Even before Pony becomes an ace storyteller, Dallas acts as his muse, or inspiration. Pony says,
I used to like to draw his picture when he was in a dangerous mood, for then, I could get his personality down in a few lines. (1.46)
Notice the "used to." This is some subtle foreshadowing. Pony no longer sketches Dally because Dally's already dead when Pony's writing. His death is one of his reasons Pony's writing this piece in the first place
The wife is old, ugly and lowborn. Even the knight tells it to her on their wedding night. It is also decadent for the knight who might have been wed to a beautiful woman. Therefore, the woman is really careful and shrewd. Using her wiles she tries to make the knight marry her.
I would say the answer is a