What role does honor play in this duel?

For Sanin the duel is both a matter of honor as well as an opportunity to impress Gemma. He is absolutely smitten with the young lady and sees his chance to prove his manhood to her when a German soldier staggers over and drunkenly refers to her beauty. Sanin challenges the soldier, calling him "an insolent cur." For the soldier, Baron von Dönhof, this is an outrageous insult. His honor and integrity have been impugned, and by a mere civilian too. The Germans comes from a culture in which the military is seen as a breed apart, a privileged class imbued with a sense of superiority over civilian society.
Both men are motivated by the satisfaction of honor: in the case of Sanin, Gemma's honor; in Baron von Dönhof's case, his honor as a soldier and the honor of the German officer corps. Although the duel ends somewhat farcically, Gemma is indeed impressed by Sanin's defense of her honor. So much so, in fact, that she breaks off her engagement to Klaus.