Yeah, at first, it seemed like a crappy decision, but considering what actually happened and that they weren't the leaders of anything, they really weren't in a position to be like, 'I'mma spread the truth!!!!!'. The most they could do, which was mentioned in the game's ending, was have the kingdom slowly leak out the truth and get ppl adjusted to it.
I don't really like how they handled it personally, but it is a reaction I can understand objectively.
And it's not like they didn't realize that they weren't throwing Shion under the bus in some way, but imagine if, for example, Christ was really a pedophile o SUPER gay in real life and everything ppl grew up hearing was all BS created by the powers that be to hide all that. How do you think the real world would take that? Like, not well.... Oh, not at all.
Having said all that, the truth exists and they have to live with that... I think, the only real choice they could make, aside from slowly leaking it out like they decided to, was to risk civil unrest.
Like I said earlier, the way things went down and how they handled it did leave a bad taste in my mouth... but even the dragons and Shion's on kid didn't know what to do about it either after so much time had passed....