So, Balduran can think that you like him, and he will try to get romantically involved with you. You can say to him something like "no way, you freak" and then he goes nuts. His admits he was manipulating you all the time and that he will force you to help him no matter what. You then can go "haha, so now all masks are fallen".
And that's it. Now you know Balduran is not a good guy but a selfish manipulative bastard. But... the game completely ignores it! In all further dialogues Emperor again tries to be you ally and friend like nothing happened.
It could be funny, but it's too immersion-breaking.
