Madina lost its capital city, much of its nobles and a duchy. As to how it looks now, Madina can only lose more by destroying Aurvandil, because you can not take back what you lost (at least not at the moment).
War has already been declared, but with the right diplomacy, I think it is more valuable to give give this new realm a chance and establish peaceful relations on your terms. Madina will have the leverage here, because Aurvandil is most likely eager to survive. Then Madina can reconquer its island in the meantime.
Later you can always decide to take back what is rightfully yours. 
I can not say that. That would be unethical.
