Should the engagement be broken off after the fiancée admits to engaging in lesbianism and expresses remorse, and would breaking off the engagement be considered an injustice to her, or a covering up and preservation of her psychological state?

The woman made a mistake by telling you about the sins she committed. It is incumbent upon one who falls into sin to repent and conceal themselves. However, if she is repentant and righteous, then the engagement should not be annulled, because repentance wipes away sins. Annulment of an engagement is permissible when necessary, but it is preferable not to, due to the psychological harm it entails. We also note that the suitor is a stranger to his fiancée before the legal marriage contract, so it is not permissible to be in seclusion with her or to excessively converse with her.