In Love Letter, can you discard a card instead of playing it?
No, you must always apply the effect of the card even if that card would hurt you, such as playing the prince with the princess in hand when the other 2 players have handmaidens out. Always having to play the effect of the card is spelled out in the rule book and making a house variant to change that would greatly alter the balance of the game as it would remove the negative side of some of the more powerful cards in the game.

The point of this is that there will be times when playing a card can be very bad for you and that is to balance out the fact that playing a card can be very good for you or at worst neutral most of the time

Love Letter PDF Rules


  On your turn, draw the top card
  from the deck and add it to your
  hand. Then choose one of the two
  cards in your hand and discard it
  face up in front of you. Apply any
  effect on the card you discarded.
  You must apply its effect, even if it
  is bad for you. 


If there are no valid targets because all other players have a handmaiden in play you can still use the card and in most cases nothing will happen.


Guard - Nothing happens
Priest - Nothing happens
Barron - Nothing happens
Handmaiden - Does not target others
Prince- You must target yourself and discard your other card
King - Nothing happens
Countess - Does not target others
Princess - Does not target others