//“The young princess Bolkonsky came with handwork in a gold-embroidered velvet bag. Her pretty upper lip with its barely visible black mustache was too short for her teeth, but the more sweetly did it open and still more sweetly did it sometimes stretch and close on the lower one. As happens with perfectly attractive women, her flaw – a short lip and half-opened mouth – seemed her special, personal beauty… Anyone who talked with her and saw her bright little smile at every word and her gleaming white teeth, which showed constantly, thought himself especially amiable that day.”/

I take it to mean that her upper-lip hair (not really a moustache as we would understand it) is an endearing flaw in her appearance and that she is being described as beautiful despite her flaws, not because of them.

Like how you might describe someone today as having a cute gap in their teeth. It's not a conventionally desirable feature, but it adds individuality to a face and humanises it. It's the 'girl next door' effect.

I think that he's referring to the light down on Princess Lise's lip, for example, rather than a proper mustache.