D&D 5e – Dominate person recognition, and Squeezing question

Had an interesting session with a DM I generally quite like playing with where he made 2 decisions I disagreed with. Unfortunately a bit of research hasn’t clarified if I’m misunderstanding the rules, so I thought I’d ask:

Scenario: We encountered a frost giant and a few stone giants who weren’t yet hostile to us, but not friendly and refused to cooperate. I cast dominate monster on the frost giant (the leader), making him listen to us in the first instant, while another party member tried to convince them to help us. I then took full control of him, and got him to tell the other giants that we were friends (all of this happening telepathically, as per the spell). At this point the DM said one of the stone giant (a dreamwalker) recognised him as being charmed (apparently because he looked dazed and said that we were friends randomly), and immediately attacked the frost giant, forcing another save and releasing him. The justification here was the stone giant dreamwalker is familiar with charms (it has a passive charm power that does not allow a save on damage, so works quite differently to dominate monsnter). I left it when he made the call but then after the game finished argued that because the spells are quite different I doubt she’d have recognised it, and even if she did, she’d be more inclined to attack me than her leader the frost giant.

So question 1, how easy is it for another NPC to recognise that a creature has been put under the dominate monster spell, after the spell has been cast and the verbal/somatic components not noticed? And would they think that directly attacking that creature would be the most reasonable course of action, barring metagame knowledge of saving throws. A dreamwalker has an intelligence score of 10 and a wisdom of 8.

Question 2, the squeezing rules are quite clear, a large creature can squeeze through a 5 foot space. I have a Pegasus through find greater steed, and he ruled it couldn’t enter mordenkainen’s magnificent mansion despite the rules as written, because "there has to be some disadvantage to having a flying mount, and practically its wings wouldn’t fit". From everything I’ve read it looks like my reading of the rules is correct both as written and intended, other than it being his world and him getting to make up the rules at the table, am I missing anything? List item