During the third iteration the sponsor retired and a new sponsor unfamiliar with agile requests more control over the team. What should the project manager do?

The project manager should meet with the new sponsor to explain the agile approach and how teams self-organize. This proactive communication helps educate the sponsor on agile principles, such as self-organizing teams and iterative development, which can alleviate concerns about control. It fosters understanding and builds a collaborative relationship. Discussing the request with the team at a daily review meeting is inappropriate as it's a sponsor-level concern requiring direct engagement. Calling an emergency meeting to comply with every request is reactive and undermines agile principles of self-organization and team autonomy. Discussing it at the iteration review is too late for an immediate concern and doesn't directly address the sponsor's need for understanding.