He saw a human girl.
By the time Vassily finally meets the Duke's Daughter (Natasha?) he's had an amazing adventure. He's tasted human blood for the first time, hunted a wild stag and met a woman of the People, his future wife.
When he finally meets Natasha, his immediate reaction is that she is...
"Beautiful indeed, and pale, and fragile".
The implication being that not only is she not a suitable mate for a wild freeborn werewolf like himself (which is of course the point of Grandfather's parable: werewolves should only mate with werewolves) but that he clearly views her as a potential snack, something that fills him with horror. She also represents being tied into a purely human existence, far away from the thrill of 'The Hunt' and the taste of fresh blood.
"I'm hungry. Take me away from here. Please".
The Duke's daughter represents an unattainable goal right up to the point that she's attained, at which point he doesn't want her.
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This is also stated by Neil Gaiman in The Sandman Companion (emphasis added):
Hy Bender: Any comments about the very end of the story?
Neil Gaiman: Well, the granddaughter thinks the fairy tale's about her and her boyfriend, but of course it's not at all; it's a true story about her grandfather, and about dreams better left unrealized.