The Emperor was one of the people who we were warned about, and have reason to believe is associated with madness. If he's their source, then I remain skeptical.

As it stands right now, I agree that they have better access to information about the Sage, the Teishu and the castle itself through the Emperor. But that doesn't mean the Emperor knows who the spy amongst us is, does it? If anything, you'd think the Sage would have warned our spy not to contact him if there was water near by.