I think we can cope with a turn of military ambition, especially since it might be very productive in the current climate. And hey, building chariots is something of a long-term investment, at least.
I don't hate the merchant, and he's apparently loyal to Rulwyna's family, so maybe he could be trusted to guide the kid. But I see no particular reason for her to take the throne, since we don't have or want a hereditary position.
Plus, picking a semi-outsider should strengthen Cosmopolitan Acceptance, right?
[X] [King] Phygrif (-1 Legitimacy, Main Build Chariots, Heavens Hawk become a March)
The other two choices are easy. We're already on Restoration policy with high Stability. Don't leave those poor people to starve or be killed by bandits!
[X] [Hat] Yes, become a Colony
[X] [Refugee] Take in as many as possible (-2 Stability, chance of further loss, +6-8 Econ, different benefits if Hatvalley a colony)