Final answer:
The Green Knight spared Sir Gawain's life because he was moved by Gawain's honest confession (option b) and repentance after not fully adhering to their agreement. The Green Knight's act of mercy emphasizes the theme of nobility as a blend of honesty, repentance, and striving for virtue.
Step-by-step explanation:
The Green Knight spared Sir Gawain's life even though he hid the sash because he was moved by Sir Gawain's confession. This is shown through the narrative where the Green Knight, who is also Lord Bertilak, reveals the entire game was a test of Sir Gawain's character. Lord Bertilak admits that Gawain has proven himself as one of the most virtuous knights, despite the fact that his desire to survive led him to conceal the magical sash. Gawain's subsequent display of genuine guilt and readiness to atone for his failure to fully adhere to their agreement was seen as admirable.
This act of mercy from the Green Knight towards Sir Gawain is more aligned with the theme of the story that nobility includes the capacity for honesty and repentance rather than a perpetual state of perfection. It is through Gawain's humbling experience that we learn that a true knight is not one who never falls, but one who rises again and strives to uphold their virtues.