Room 40 knew a U-boat was heading south to Liverpool - knew the boat's history; knew that it was now somewhere in the North Atlantic under orders to sink troop transports and any other British vessel it encountered; and knew as well that the submarine was armed with enough shells and torpedoes to sink a dozen ships.
I was a promiscuous reader. I loved Nancy Drew books and Tom Swift - never the Hardy Boys - but I also read Dumas, Dickens, Poe, Conan Doyle, and Cornelius Ryan's war books. As to favorite character: I'm torn between Nancy, on whom I had an unseemly crush, and Edmond Dantes, the Count of Monte Cristo.
I do think hubris played a role here as well, the belief that the Lusitania was too big and too fast to ever be caught by any submarine, and that, in any case, no U-boat commander would think to attack the ship because to do so would violate the long-held rules governing naval warfare against merchant shipping.