Why would Council and Orcs go into fight, if the Council supposed to be exist and formed from all the races only during the rising of the Damned One/Lord of Chaos?
The council and orcs/imps/lizards were at odds during Divine Divinity, so there is no reason some or most orcs couldn't be hostile in a different time. After the League of Seven sacrificed themselves to defeat the Lord of Chaos in the second war with the Damned, the council continued to function for some time (Zandalor was chosen as the next mage council member). By the time of Divine Divinity it had been inactive for awhile, but there is a lot of time between those events.
