He’s been Lee In’s right hand man and personal bodyguard for the longest time. Judging from their interactions, I would surmise that they may have grown up and trained together in the warrior arts.
Out of all the people around him, Joo Sang-hwa is probably the only person - with the exception of his former master and Hee-soo’s father, Kang Hang-soon - whom Lee In trusts implicitly.
Thus, I think it’s reasonable to assume that Joo Sang-hwa is one of the few people who know the truth about Mongwoo. At least, the fact that she is a woman. Being an astute and observant person (he wouldn’t be an effective captain of the King’s guards if he weren’t), I’m sure Sang-hwa already had his suspicions early on. However, being the discreet and loyal right hand man that he is, he keeps his opinions to himself.
When the rumors of Lee In having a preference for men circulated, as supposedly evidenced by the fact that he never bedded any of his wives, not even the Queen, Sang-hwa didn’t seem to look perturbed. Perhaps because he already knew the real reason why Lee In refused to consummate his union with any of them.
As for the strange affection and preference that Lee In had for Mongwoo, I think it was more of a puzzle to Sang-hwa than anything. Perhaps he was mulling over it in his head. He didn’t have any reaction when Lee In only emerged from Lord Kang Hang-soon’s the next morning. Maybe he had already pieced everything together in his head so he already suspected the truth.
I think by the time Lee In had him “capture” Hee-soo and delivered her to him, Sang-hwa was already full aware of what was going on between his king and the gidaeryong. Maybe that’s why he takes care of Hee-soo, not just because Lee In ordered him to do so, but because he knows just how much she matters to his king. Hence, he will protect her and her secret because if it comes out, it can destroy Lee In.
In any case, I love his friendship with Lee In.
