Considering that the original Storm King was waging war against The Heterodyne, I'd say that no citizen of Mechanicsburg considers the town to have ever been part of any Empire - including Klaus', but especially not the Storm King's. Ask a Jager if Mechanicsburg is part of the Storm King's Empire and you'll likely lose your hat - and any plan where you lose your hat is a bad plan.

What upsets Seffie, I believe, is Krosp pointing out that Gil is in thrall to Agatha. She doesn't care about the politics of Mechanicsburg, her eyes are on the prize (either sister to the King, or married to the King), and pointing out that Agatha is a very serious obstacle on both paths curdles her cream.