I feel I need to explain why Caelum has decided to essentially give up on being a Knight. It's a combination of several factors.
1. Caelum is afraid, as stated in the chapter, of the repercussions the reveal of his powers would have for his family.
2. Caelum is feeling guilty of having essentially crippled Ser Elmar. On top of that he has chosen to not actively search for the Knight, and has actively avoided hearing any news regarding what has happened to said Knight.
3. Caelum is afraid of being labeled a Demon, it's a direct consequence of being called that twice at such a young age.
4. And more importantly, Caelum has lost faith in the institution of Knighthood. Or is in the process of it. Until now, he'd been dreaming the ideals of Knightly conduct, and chivalry. Internally, he had been exposed to the truth of it back at the tourney, and it's only now, after Marwyn that it is sinking for him. He has yet to acknowledge that. Caelum has also been disenfranchised by the system of nobility, and feudalism. (He doesn't know it's called that)
Now, given that this is outside the scope of MoS, and I don't have enough precedence from that, I looked into Comics for how Superman reacted when he seemingly lost faith in the governmental system. (Democracy)
In Superman: Kingdom Come, Superman loses faith in the justice system and hangs up the mantle. He takes up farming and chooses to stay away from
Superheroing. Of course, he'd known that the world was safe from existential threats, due to the presence of replacement heroes like Magog. He was merely in disagreement with how they did things. (Being Judge, Jury, Executioner)
Here, Caelum is asking himself, not so directly yet, about which lord to serve. As a Knight, it would be essential to serve a Lord. He could be a Hedge Knight, sure. But that still means he will be beholden to a Lord. He does want to be, as Marwyn put it, a dog serving a Lord. His primary motivation in becoming a Knight, apart from gaining the respect of his village and fulfilling the NFL-esque dream just like Clark Kent's, is to help people.
He's been told by several people that he doesn't need to be a Knight to do that. By Luke, his father, Septon Mattheus back in his village, Marwyn etc. He really just needed to see that for himself.