“Who the prize winner will be” is a clause. The subject of the clause is “the prize winner”, and the pronoun “who” refers to the prize winner, so it will be in the subject case.
You can get to this by replacing things with pronouns.
The principal has decided [who the prize winner will be].
=> The principal has decided him. (Wrong :x )
=> The principal has decided it. (Right )
Who/whom has the principal decided? (Bad :evil: )
What has the principal decided? (Good )
So, you see that the principal is not deciding [who]; he is deciding [who the prize winner will be]. You can pose that as an echo question: “The prize winner will be who?”