Not quite. He is sniffing out magic (?), or rather the magic's scent rather than the person. That's why he couldn't sniff her out, because she would reek of like Zeref now.
Originally Posted by Rykimaruh
In a world of magic, where changing appearance doesn't seem hard, heck Lucy's Gemini can copy someone's power and looks, so I'm not surprised that Princess didn't want to believe her.
I was originally hoping that it would have been Lucy from an alternative time-line, where they proceeded with the plan, returned to past, eliminated Zeref, but Zeref's existence was a must and Lucy had to take his place unwillingly which fuck*d up everything even more.
Or perhaps the world was plunged into darkness in the near future and thus everyone gained Zeref-like characteristics ?