A quick question: What's with all the beings on both sides who have fallen to the propaganda and take this premise? I mean it's one thing to kick the evil bastard, but quite another if you kick the indoctrinated innocent or the one who wants to believe in it.
Think about WW II and sadly far to many germans who believed the propaganda and where mostly left in the dark - e.g. the commoners so to speak. Sure some or even many had a bad feeling about several things and it didn't helped that all to vocal people outright vanished or worse. But let's tone it down to a small city or a hamlet... and don't forget that medieval rulers and the gentry in general where perceived as the betters compared to the lowborn. Sounds ridiculous to us today and may be a reason why my group responds most of the time - at best - neutral with regards to the gentry and highborn.
So many people might swallow the propaganda - at least in the beginning - and what's worse some "heroes" might feel the need to help the other side... out of goodwill or so... Granted this support might vanish after some really horrible deeds done, but who says that these will happen. Even worse if both sides employ lots of spys or even some kind of secret police to further their goals.
Just to give you a impression how worse a secret police can be: I grew up in the GDR (German Democratic Republic) up to the age of 9, after that you know what happened. But we had an agency best known as Staatssicherheit (short: STASI) they employed all kind of methods to keep the people in line. One of their strategys: Using civilians as IM (Inoffizieller Mitarbeiter) best translated as UE (Unofficial Employee) and these guys kept their ears on the ground so to speak. Sometimes they were employed to target their environment and sometimes to shadow specific targets. Sometimes they even tried to use children against their familys in this way.
My father did his time in the NVA (Nationale Volksarmee, translated as National People Army) and there he met a guy (an actor fresh from the art school) who mouthed of a little bit to loud and bang he was in for questioning. My father the guy that he is tried to tone things down so that the guy wouldn't get into trouble. He told me that he said that the guy made a joke, nothing more. But he wasn't the only one who got questioned, and some must have said something else. And therefore this guy vanished over night... literally. Remind you, they busted him for joking around and they disallowed him to work as an actor. My father supposed he got jailed, either in a military prison or worse in one of the Stasi prisons.
But that wasn't the end of the story. He got cited again for further "questioning". He had to endure questions like why his telling of the event where not like some of the others. Sounds not so tough, until they do it for some hours without pause. And he wasn't he only one to be cited again. This got on and on for a while until they let him get away. But after that they kept tabs on him and some of my family - two years that he knew of. And back then my father was a farmer/rancher kind of dude, nothing important so to speak... but they threatened to make his life hell and then some more worse. That event taught him not to trust anyone. In the GDR it was sometimes quite literally against the law to be heroic or upstanding.
And there are cases far worse than his little "encounter" with the STASI. So a secret police or spys keeping tabs on certain people might freak out many.
Also they could through organizations like this trying to supress the opinion or will of the general populace. It might work only for a limited time, and it might also backfire big time, but nonetheless. If someone is desperate or confident enough, they might think about such things. Add in things like magic and spys and other organizations are a very big players in the infotrade business.
I also second Mister Andersen's comment that widespread political assassinations on both sides would quite likely start before the ink on the parchment is dry... hell, even the rumor of such a treaty could unleash bad things on anybody stupid enough to suggest it.
Also - on another note - how interact the goody-two-shoes and the evil-afoot realms in your supposed setting? Also note that the guys who think of themselves as good can pretty easily enact pretty mean things in the name of good (point in case the Inquisition). So the bady guys might have a reason to do their "bad" stuff. Are there treatys in place on borders that they share, like non-agression, peace or even trade treatys? Also which side honors those treatys? If they are constantly engaged in balls-to-the-walls warfare several options might be of the table... but if there are only raids things might be far better to forge a treaty... but the victims of the raids would heartily disagree.
Just my two cents.