I enjoy these episodes where Sully and Michaela have different points of view about ethical issues. Like here in telling the truth or a lie to protect the Indians. Did you notice that most of the times it is Michaela who ends up seeing the things as Sully does? When talking about morals I mean. She doesn't like lying to the army to cover the Native Americans but then she is compelled to lie to protect Sully, forced to do for him what he was asking her to do for another. So in a way, aggreeing with his point. They are so sweet.
I think it is more or less what you said lrsmith11, but in a rough way.
It happens in other episodes like Eye for An Eye or Dorothy's Book.