Did Dev realize that the Sanyasi who came for a meal was actually Sai Baba in disguise? What does the text say about his state of mind?

No, Dev completely failed to recognize that the Sanyasi and his two companions were Sai Baba. Chapter 40 explicitly states that even though Dev personally served the three uninvited guests, 'it did not occur to Dev that it was Baba; the doubt remained in the mind.' The text explains that his perception was clouded by a 'veil of Maya,' causing him to see the visitor merely as a guest who had come for a meal. His delusion was so complete that he later sought confirmation from another devotee, Jog, remaining entirely unaware of the profound experience he had just participated in.