Manfred claims dominion of Otranto by his claim Alfonso the Good dying childless, 'bequethed his estates to my grandfather Don Ricardo, in consideration of his faithful service.- [ the stranger shook his head ]'

I wonder why the stranger knight did not agree with Manfred's explaination ?

Manfred admits Frederic of Vicenza is nearest in blood to Alfonso. Isabella as his daughter appears to be the heiress of Vicenza and therefore, of Otranto.
His orginal scheme to marry his son to Isabella is at an end.

Manfred's speech to the knights is peppered with untrths-
A pretense of tears for Conrad, pretends he'd prefer to resign his principality, claims he was willing 'to restore the line of Alfonso'- or get Isabella and legitimize the claim of his forefathers ?
Worst of all, Manfred lies that Hipplita shares his 'scruples' about their union and she consented to bring the matter before the church.

I doubt Manfred's fooling them with his codswollop. 'The knights gazed on each other, wondering where this would end'.

* I assume Don Ricardo was a retainer, a knight in Alfonso's srvice. To try and strengthn his claim to Otranto, Manfred assumes heavenly authority by claiming his grandfather held Otranto 'by his good sword, and by favour of saint Nicholas-'