Actually, if we looked back at the snowstorm shooting scene from Molly's POV (as shown at the start of the 7th episode), we could see that she and Malvo did stare into each other's eyes for a good few seconds. I was thinking Malvo, being Malvo, was deliberately avoiding coming right out and asking Lou who the woman was, instead attempted to (and did) get the info by casually dropping a question about the man in the photo.(But then yes you have a point in that he wouldn't know just how much she has on him.)
I am so ready for the finale showdown. Bring it.