The power states: "you know the location of any celestial, fiend or undead within 60 feet of you that is not behind total cover"
RAW I understand that the DM can never EVER put in front of you a disguised fiend or undead, which could be fine in Forgotten Realms but weird in Ravenloft, IMHO.
A simple Amulet of Proof Against Detection and Location (you are hidden from divination magic and scrying) would stop the detection in my world. Some people may argue that a paladin's divine sense is not technically labeled divination magic, so it's just my ruling.