Maybe I can help by taking it out of the context of game mechanics?
Helyg Derwyddon sees Luria Nova mucking about the area, trying to convince the peasants they're in charge. Astrum is coming to try to stop them. As a third party, you may want to fight Astrum, but they're going after those guys you have decided not to fight, so you may as well watch them tear each other apart. It's exactly like "the enemy of my enemy is my friend" before the point at which you choose to formalize that arrangement. (I would argue that the saying could imply parallel, but ultimately different efforts.) As Indirik says, you've decided you don't want to kill them (Peace), but you haven't quite got to the point where you've chosen to expend resources on them (Allied).
That still makes little sense. I'm still at war with Astrum, so Astrum's not a friend, so the "enemy of my enemy" thing falls apart right there. This whole situation is so !@#$ing stupid it's astounding that you guys even put up with it. What's so hard to understand that if I'm at war with a realm, I should fight them? If I wanted to be neutral, I'd !@#$ING CHOOSE NEUTRAL with Astrum and attack with Aggressive/Murderous settings. But no, apparently our idiot soldiers are like "Oh hey, aren't those the guys that want to kill us? Let's sit over here and not fight the realm we're at war with."
