I think we should try to avoid calling the Bretonnian crusade an "invasion." Their king declared that the knights would be trying to scour our forests of threats, and that's really no bad thing. If a few Bretonnian noblemen take lands within our Empire, it's not the end of the world. We should try to set up some kind of deal where those lords can hold lands (which otherwise might have been lost to orcs, bandits, or worse) but will respect the sovereignty of the Empire and will answer to the Elector Count of the region in matters concerning those Imperial lands. Perhaps something along the lines of "ok, you can have these lands, but you must pay tribute and contribute men-at-arms during times of war."
I think in this campaign the High Elves and Bretonnians are our natural allies, and we should strive for a truce with wood elves and dwarves. Overtures to the lizardmen aren't a bad idea, but who can say what the cold minds of the lizardmen will decide? At the very least though, we don't want a war with Bretonnia right now, we have far too much on our plate as it is!