I was wondering if a failsafe state existed for not interacting with the Tieflings and Goblins at all, turns out there is none. So the argument of there being some kind of neutral third path is now void.
I tried that as well. There is no way to avoid the initial fight in the grove. I tried to avoid everything else (meaning I left immediately after the battle was over without entering the grove) but I kinda broke the game.
If you only do the grove gate fight the ending cinematic only mention you discovered the Grove and the Tielfings (which you did), then it skip to the dark fortress part.
If you watch the video from the start, you'll see how he bypassed the grove gate fight.
And I'm not sure I get the "no failsafe state = no neutral third path". The cinematic at the end is what you are thinking of (your reverie), why would you know anything about things you weren't around for?