War either creates an affirmation of ethics and morality or destroys them. It has that effect, there's nothing in between. For example in Pan's Labyrinth the girl becomes so absolutely certain of her internal reality that she does not mind her physical death. She conquers death by absolutely just saying, "I'm in a throne room with my family, I'm happy." It's a conquest, but she dies. In my mind that's not a failure.

In Bilbo's case, the easiest thing for him to do would be to stay loyal to the dwarves and, frankly, to take a different stance on Smaug. Who knows what the easier choices were - many of them - but he takes the hardest choice.