It's nice to see a king with a good head on his shoulders in stories like this.
Yeah, he outright declares Dion unfit to rule the country without support. Support which he insists on throwing away. All things considered, making the other prince the heir is probably the best option at this point.
I also appreciate how quickly we got this secret out in the open. Honestly, it's not the best reason to annul a marriage since they should be dealing with rebellious noble houses anyway, but the fact remains that the marriage wouldn't have worked out with the first prince's personality.