Yes, if Huan calls Shu inside the room then Nanami is not dead. However, you won't be able to see her for the rest of the game until you finish it and proceed to get the best ending. At this point, you'd want to see a walkthrough if you've never seen the perfect ending before.
As for me, I've played Suiko 2 so many times, and I always get the best ending. Always. Just follow the perfect ending guide on suikosource site, it's not hard at all.
Also, there are rumors that say you have to choose the 1st option right before Nanami is shot by arrows. It's not true, either option is okay as long as you choose one by pressing x button. If you don't press the x button, the dialog window would close and you're ruined. I have proven this myself and atleast for me, either option is okay.
But thou art wind!
Do not scream:
thy fragrance deafens.