If Darka is to fight, we will not go lightly. As a single realm, our military prowess may even surpass CE when both of our armies fight together.
However, I personally believe we should be suing for peace, or should win a battle and THEN sue for peace to deal from a position of relative strength(not that there is anything about our situation that screams we are in control...). Losing Massillion and everything East of Clintoc-Tolhuar-Saler wouldn't be so bad. It would hurt no doubt, but we could agree to it(and more importantly, CE and co. could control it with the noble count they have). Also, returning to a true mercenary way of life wouldn't be so bad either. I mean, CE is the richest realm anyways. It seems to me, from us returning to a mercenary way of life, they would benefit the most. It would be like a safeguard in case any of their puppets turned on them. Also, they would just see people like KK are thrown out the window and that those willing to submit to mercenary ways are instated.
TL;DR:
CE should offer the following:
1. Massillion, Wistir, Tertul, Tintar, Malor are taken from Darka to give to puppet X(maybe if they are making a new puppet out of Eston they could feed them to it). Ixzal gets taken and given to Talerium.
2. KK forced to step down.
3. Forced to return to mercenary values or will be destroyed. Also forced to work for the highest bidder(CE should profit from that).