How did Delver feel when he saw the picture of Lily in ch 47? I didn't understand

My take is that he sees her smiling happily in a beautiful red dress that he cannot make for her and thinks she is in a much better place than with him (with the crude handmade dresses, cramped living place and no other humans as friends for her). So he thinks it is better to let her go and that she is happy.

Thank you for explaining!

You are welcome!