True, she knows Suzaku is lying now, but only because Lelouch told her he was in trouble. Even then, she still says he's "missing" for some reason, hasn't she looked around for him?
Someone also brought up this point up on another forum - Charles di Britannia tried to reform Britannia from the inside. He failed. His excuse? "Britannia never changes". If Chuck couldn't do it, it's unlikely Suzaku or Nunnally can.
We also don't know how far Euphemia's plan would have gotten…there was a lot of anger/resentment and hatred toward Euphemia from the Britannian side since the Britannians are brought up to be racist. Look at Miss Lohmeyer in Nunnally's court, a staunch racist who undermines Nunnally's resolutions whenever possible. Clovis and Cornelia were much the same, regarding the Elevens as dogs that needed to be beaten to have sense knocked into them.
If everyone in the empire is like Miss Lohmeyer, the only way Suzaku or Nunnally could change them isn't with reason, but force. Terror. Britannia is an Empire run on power, a strong leader to bully everyone into submission out of fanatical devotion to a cause they identify with and a fear of opposition.
"rainbows and flowers" (I should explain this, it's what some Geass fans have used to term Euphemia and Nunnally's peaceful approaches to political change) can't do anything about a society founded on tyranny. The society would collapse.
...which would be ironic since collapse is what Lelouch is aiming for. Suzaku and Nunnally might have had the right idea afterall.