Rafe was being Rafe, trying to play the martyr. His logic was probably that she had to take him and by saying that it instantly gets him stephs vote.
I think it was smart for Dani to vote Lydia out. She could have been a dark horse to win since she didn't do much to piss people off. Dani knew that if Steph won she'd pick Dani and had a good feeling that Rafe would do the same. She also knew that it was unlikely for Lydia to have hard feelings about being left out of the final three.
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