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With distance comes perspective, and in Diana in Search of Herself, due out later this month, bestselling author Sally Bedell Smith portrays the late, beloved princess as infinitely more troubled than the public realized. Though she radiated grace and poise, Diana suffered terribly from chronic loneliness and an overpowering insecurity. She hated being hounded by the press but at the same time often initiated telephone calls to reporters. "Diana was trapped in a terrible hall of mirrors," says Smith. "There was a huge disconnect between her public persona and her private life."

In the two years since the princess's death on Aug. 31, 1997, Smith, the respected Washington-based biographer of CBS founder William Paley and social doyenne and U.S. Ambassador to France Pamela Harriman, interviewed more than 150 people, including Diana's closest friends, staff and advisers, many of whom spoke about her for the first time to a journalist. "Sources that I developed from my previous books as well as longtime friends were able to vouch that I was a serious writer and would write a serious book," says Smith, 51. "Once people were convinced of that, they were willing to talk because they wanted to set the record straight."

Acknowledging that "psychiatrists and psychologists have debated Diana's condition in the British press," Smith argues that Diana, who was 36 when she died, suffered from a fairly common, but often elusive, mental illness called borderline personality disorder, the symptoms of which include impulsiveness, feelings of abandonment and an inability to sustain relationships. Borderline personalities, Smith writes, "are typically confused about their identity. They are self-destructive, easily depressed, panicky and volatile. But on the surface they are apt to be charming, insightful, witty and lively."

Smith also believes that Prince Charles "lacked the knowledge and temperament to help Diana deal with her torment. He probably deserves more credit than he has received for trying to get her into therapy" during their 15-year marriage.

Earlier this month, Charles, 50, included Camilla Barker Bowles, 52, and her children on his annual Aegean cruise with his sons—a sign that points up his longtime love's increasingly public presence in his life. Unlike last year when the flag flew at half-staff throughout the country and the Windsors went to church on the actual anniversary, Buckingham Palace said that this year each member of the family will remember the princess "in their own private way." Princes Charles, William, 17, and Harry, 14, who will be at Balmoral in Scotland, plan to attend a service on the 29th at nearby Crathie Church; the Spencer family will gather at Althorp, where Diana is buried.

Smith knew this book would end in tragedy but says that researching the princess's life was even more unsettling than she expected. "It is," she says, "the saddest project I've ever worked on. Diana needed so much help, and, due to her position and the nature of her problems, she was never able to get it." In this exclusive excerpt, Smith recounts key events in the last years of Diana's life, including new details about her ill-fated relationship with Dodi Fayed.

The autumn of 1996 saw Diana's final rupture with Sarah Ferguson, who overstepped the bounds of friendship, in Diana's view, when she published her biography in November. Though the book's references to Diana were mostly positive, one passage patronizingly pointed out Diana's "teary and reclusive" manner around the royal family. Fergie also tastelessly revealed that she had contracted warts from wearing Diana's shoes, a revelation Diana considered "unkind." Diana cut her off without a word. Not only did Diana stop speaking to Fergie, she wouldn't permit her name to be mentioned in her presence, and she refused to answer Fergie's letters or take her phone calls.

Still, Diana had a hand in her own image-making, not only giving behind-the-scenes assistance to journalists but also dueling with Prince Charles in tell-all books and interviews. Between the couple's separation in late 1992 and their divorce 3½ years later, Diana continued with her many charities and traveled abroad to promote humanitarian causes. She also weathered ongoing revelations of liaisons with various men, including Dr. Hasnat Khan—"Natty" to his friends—a 39-year-old heart surgeon from Pakistan she met while visiting one of his patients at the Royal Brompton Hospital in September 1995.

Because of Khan's aversion to publicity, Diana took to wearing disguises, including custom-made wigs and glasses with nonoptical lenses. The couple went undetected to jazz clubs and restaurants in Soho or Camden Town. But they spent most of their time together at Kensington Palace and she considered him a vital anchor in her life. "She was emotionally more stable when she was with him," said a friend of Diana's. "He taught her that she could be loved." Diana told friends she was especially pleased that Khan admired her empathy for the sick. As Diana confessed to her friend Elsa Bowker, "I found my peace. He has given me all the things I need."

But Diana's love was characteristically accompanied by possessiveness. This time, she tried to advance Khan's career and, in the process, the prospects for their life together. She asked South African heart surgeon Dr. Christiaan Barnard if he could help find Khan a position in South Africa. Diana revealed that she wanted to marry Khan and, said Barnard, "have a pair of girls...She wanted to move away from London with him. South Africa was her first choice because her brother was there."

As she had with Prince Charles and her other lovers, Diana tried to control Khan, fearing he would reject her. Her energy healer (a kind of alternative psychotherapist) Simone Simmons remembered that Diana "was so impatient to have Hasnat's undivided attention that if he used the Kensington Palace telephones to speak to his family or friends in Pakistan for more than 10 minutes, Diana would turn her music up or dance before him to distract his attention." Diana also frequently phoned Khan at the hospital and "was often upset if he was in the operating theater and couldn't talk to her," Simmons said.

As 1997 began, Diana seemed no closer to finding herself or her place in British life. Yet, her bold campaign against land mines, which she advanced by going to war-ravished Angola, played well in the press, as did the announcement in late January of her plan to auction her old dresses in June to benefit charity. The auction came off as an ingenious way of raising money, as well as a powerful statement that Diana was putting her royal life behind her.

With the departures of most of her key aides, Diana now handled many press inquiries herself. Some editors found her mercurial ways exasperating. "The confusion was there all the time," said Sue Douglas, former editor of the Sunday Express. "One minute she was going out with the boys wearing her shorts and a baseball cap, but she would be immaculately made up because she never thought there would not be a photographer waiting."

Nor could Diana restrain herself from reading everything written about her. "There was always an element of insecurity for Diana," said one old friend. "She wanted to know that what she was doing was being approved of, and I think she found it mesmerizing." Having witnessed her sensitivity for too many years, butler Paul Burrell finally began hiding the most unpleasant articles. "I always got a strange look when certain papers weren't there," he said. "She would ask for them, but I wouldn't let her see them."

Diana believed she had to wage a constant battle for survival with the media. Yet she also seemed to relish the disguises and deceptions she employed to deal with the press—and the public. One of her more peculiar practices was "hiding in plain sight." As Simone Simmons explained, "I coached Diana in the art of pretending to be someone who bore a strong passing resemblance to the princess." The trick was to engage in such mundane activities—hailing a cab, taking money from a cash machine—that observers couldn't believe she was the real Diana. "If someone gave her a wide-eyed and puzzled stare, she would smile and wave at them, as if daring them to challenge her."

For nearly 18 months, Diana persistently misled the press about Hasnat Khan. Her motive for lying was to protect him as she sought to make their relationship work. "She would have converted to Islam, she would have done anything," said Elsa Bowker. But Diana miscalculated when she made a spur-of-the-moment visit to Pakistan in May 1997. Her unstated purpose for the trip was to meet Khan's family and "convince them that she was a nice girl," said Bowker. "wearing a traditional shalwar kameez of pale blue, she spent 90 minutes with a dozen of Khan's relatives, including his parents and grandmother.

When Diana returned to London several days later, she told friends she had made a good impression and that marriage was now possible. But Diana had not informed Khan beforehand of her visit with his relatives. He was dismayed that she had gone so far and rebuked her for disclosing details to the press. The following week Hello! magazine quoted Hasnat's father expressing doubts that Hasnat and Diana would marry. Diana and Khan continued to see each other, still in secrecy. Perhaps to protect herself from further rebuffs, Diana's comments about Khan took on a critical edge. "She said he was more scared of his family and religion and background than he was in love with her," said historian and friend Paul Johnson.

In July, Khan broke off the relationship for good. The proximate cause was an article in the Sunday Mirror alleging that Diana and Khan had become "unofficially engaged" after what the tabloid characterized as the "amazing 'summit meeting' with his family" in Pakistan.

"He accused Diana of leaking the story, although she tearfully denied it," said hairstylist Natalie Symons, who witnessed the drama. "Diana was very sore and hurting," recalled a friend she turned to for consolation. "It was the day before the trip with [controversial Egyptian-born businessman] Mohamed Al Fayed, and Diana told me it was over with Hasnat. He couldn't live with the pressure of the press, so he decided that was that." Said another friend: "I think he loved her, and I think he was the love of Diana's life after Charles." The morning after the breakup, Friday, July 11, as Diana packed for her vacation in the South of France, she "was sobbing her heart out," Symons said.

Diana's vacation at the Saint-Tropez home of Al Fayed, whose role in bribing members of Parliament had been back in the news, spurred an uproar in the British media.

Diana seemed unconcerned about photographers tracking her cruises on Al Fayed's yachts. "She was happy to be seen," recalled Daily Mirror editor Piers Morgan. "I offered to pull out of Saint-Tropez after two days, and her office said, 'That won't be necessary.' After that she did daily photo calls." On July 14, Diana's behavior turned bizarre. After Jet Skiing with her sons, she seemed relaxed and happy. Then she hopped into a launch with a bodyguard and headed for the Fancy, a 53-foot motorboat carrying reporters. Wearing a leopard-print bathing suit, Diana spent 10 minutes talking "candidly about the dark side of her life as the ex-wife of Prince Charles," the Mirror's James Whitaker wrote. "You are going to get a big surprise with the next thing I do," she said. "My boys are urging me continually to leave the country. I sit in London all the time, and I am abused and followed wherever I go."

But the next day, Diana issued a statement insisting she had no intention of making a "surprise" announcement. She further denied that she had given interviews to reporters. Then she crawled along a balcony on Al Fayed's villa, hiding behind a towel one moment, then posing at the end of a jetty before skipping up some steps, clapping her hands and singing. The combination of giddiness and furtiveness she displayed that morning could probably be explained by the arrival the night before of Al Fayed's son Dodi.

A full-time playboy who flirted with the film industry (his investment of family money earned him a producing credit on 1981's Oscar-winning Chariots of Fire,), Dodi, 42, was engaged to model Kelly Fisher. But the glamorous princess enraptured him, and she quickly warmed to his affections. "He was emotionally immature," Smith observes. "And he wasn't very bright. But like Diana, he had been abandoned. They were both looking for something missing in themselves."

In France, Diana and Dodi spent time together in quiet conversation. "Dodi couldn't bear to leave her alone," said Debbie Gribble, chief stewardess on Al Fayed's yacht Jonikal. As Dodi listened intently, Diana described her travels to Pakistan and Africa and her work on the land mine campaign. On two evenings, Dodi made the oddly flamboyant gesture of renting a disco for William and Harry to enjoy privately.

Diana and the boys left at sunset on July 20. The next morning, Dodi filled her Kensington Palace apartment with pink roses and sent the first of many extravagant gifts: an $11,000 gold Cartier Panther watch. Harrods delivered a large box of exotic fruit from Mohamed as well. But while Diana said little to her friends about Dodi, she did tell astrologer Debbie Frank that she had "the best holiday I've ever had," and "I've met someone."

Diana flew to Milan on the 22nd to attend a memorial service for Gianni Versace, who had been murdered a week earlier in Miami Beach by serial killer Andrew Cunanan. Three days later, she was off with Dodi to Paris for the weekend. Their visit to the Ritz Hotel (owned by Dodi's father) was held in strict secrecy. Dodi gave Diana the $10,000-a-night Imperial Suite and treated her to dinner at the three-star Lucas-Carton restaurant. On Sunday, July 27, they returned to London undetected.

For the next month Diana was almost continually on the move. With William and Harry at Balmoral for August, she was free to come and go, which she did more impulsively than usual. On Thursday, July 31, she stole away with Dodi for a six-day cruise off Sardinia and Corsica on the Jonikal, where their love affair began. Dodi pampered Diana with her preferred diet that included carrot juice in the morning, fruit at lunch and fish in the evening, as well as plenty of champagne, caviar and pâté de fois gras. They talked and whispered nonstop, prompting Dodi's valet René Delorm to wonder, "How can people have so much to say to each other?"

The tabloids broke the story of the romance on August 7, the day after Diana and Dodi returned to London. The Princess herself was astonishingly relaxed over the revelation of their intimacy. After the months in hiding with the media-shy Hasnat Khan, Diana intended to be as flagrantly public with Dodi as she could—in part to provoke Khan.

Although they were from different worlds, Diana and Dodi were damaged in similar ways. They both had been separated from their mothers at an early age and suffered deep insecurities as a result. Diana had taken refuge in bingeing and purging, and Dodi in cocaine addiction during the '80s. They were each prone to romantic fantasies, using gifts as endearments. They hated being alone and compensated by constantly talking on the telephone. "They were each in love with the fantasy about each other," said Dodi's friend Nona Summers. "They were in many ways ill-fated and the perfect, awful couple." Diana's head was also turned by the way the Al Fayeds spent their money. No man had ever treated her so lavishly.

Diana's life was soon consumed by her affair with Dodi. And though she told some friends she had never been happier, others heard murmurs of discontent, such as when she complained that Dodi's extravagant gifts made her "uneasy." Still, as the couple returned to Paris for a romantic weekend on Aug. 30, Dodi was determined to make his princess happy.

In the early evening of the 30th, Dodi and Diana left the Ritz's rear door to drive to his apartment. As usual, they rode in a Mercedes limousine driven by Dodi's personal chauffeur Philippe Dourneau, followed by Dodi's Range Rover bearing two security guards, Trevor Rees-Jones and Kes Wingfield. When they arrived at the apartment building, Dodi and Diana had to struggle through a paparazzi mob to reach the front door. Two hours later the couple left the apartment intending to have dinner at the fashionable Chez Benoît restaurant. En route, Dodi was so exasperated by the crush of photographers shadowing the car that he abruptly changed plans. Instead of Chez Benoît, they would dine at the Ritz.

They started out in the main dining room, but when Dodi became agitated by the presence of other diners, they left after placing their order and ate instead in their suite upstairs. Dodi couldn't face the photographers again, so he devised a subterfuge to avoid them. His Mercedes and Range Rover would act as decoys, revving up at the front door as if readying for departure by Dodi and Diana, while the couple would escape by the back door into another car. Hotel officials alerted the paparazzi at the front to expect Dodi and Diana shortly as the couple waited inside the rear exit for a rented Mercedes to pull up. A small group of paparazzi lingered in the street behind the Ritz as well. Before Dodi and Diana hopped into the back seat, Henri Paul, their new driver, shouted to the paparazzi, "Don't bother following—you won't catch us." They sped off at 12:20 a.m. as photographers gave chase on motorbikes and in cars. Five minutes later, the Mercedes slammed into a support column in the Alma tunnel, killing Dodi, Diana and Henri Paul, and severely injuring security man Trevor Rees-Jones, who was riding shotgun.

Subsequent investigations showed that Paul, the acting security chief at the Ritz, had been drinking heavily. An autopsy revealed a blood alcohol level three times the legal driving limit in France, plus the presence of the antidepressant Prozac and the tranquilizer tiapride. (The results of the official French investigation into the car crash that took Diana's life are expected by September.)

Dodi had been determined to return to the apartment, he reportedly told his father, because their belongings were there. According to Dodi's valet René Delorm, Dodi had earlier said he wanted iced champagne ready for their return because he planned to propose to Diana. These reasons overlook the sensible solution of sending someone to retrieve their luggage and bring it to the Ritz, where iced champagne could have been produced within minutes. Diana's contribution to Dodi's misguided decisions is unknown, although in the Ritz security video of the couple waiting in the hotel's rear corridor, she appears quiet and withdrawn as Dodi encircles her with one arm. Dodi's habit in such circumstances was to overcompensate, partly to impress and partly to feel secure when faced with a perceived threat.

In the months after the tragedy, Mohamed Al Fayed insisted that Dodi and Diana planned to marry, and a $200,000 ring from the Repossi jewelers on Place Vendôme was meant to seal their engagement. But according to journalist and confidant Richard Kay, Diana had not discussed marriage plans with anyone close to her—including her immediate family, her sons or close friends such as Lucia Flecha de Lima and Rosa Monckton. Even factoring in Diana's fondness for secrecy, she would have confided in at least one person—and certainly would have talked with her sons. As Elsa Bowker observed, "She called William about everything."

Diana and Dodi had known each other for only six weeks. They were together on 32 of those days, but the actual amount of time they spent alone was a mere 25 days. They floated along in their own bubble, detached from the world of everyday decisions as well as their respective friends. Yet they acted out their romance in view of the cameras, and died trying to escape the men who had tormented and celebrated them.

In Diana's final summer, she sent out many conflicting signals, playing out in public her shifting moods, doubts and insecurities in exaggerated form. Her romance with Dodi was perhaps the clearest evidence that she had made little progress dealing with her demons. "I work by instinct," she told he Monde three months before she died. "It's my best adviser." Given the number of times Diana's instinct failed her, it was a stark admission that she remained sadly out of touch with herself to the very end.