End of the Rivalry

Serve a Faction for Wealth: If material wealth is your priority, kill Chief Sootscale and take his Belt of Incredible Dexterity +2, which is more valuable than Queen Bdaah's reward. This is also a good option for evil parties.

Defeat and Spare One Leader: Defeat either Queen Bdaah or Chief Sootscale, then spare them when they beg for mercy. Report to the surviving leader for a reward (200 XP / 100 GP for either). This is a passable solution for good protagonists who didn't choose the neutral option at the first encounter. Evil protagonists might have sided with the Mites for a better reward from Sootscale, or exterminated both. Neutral protagonists have a better good option by sparing one.

Good Protagonist Approach: If playing as good as possible, it's a tricky situation as both races are predominantly Lawful Evil. Ideally, you should have picked the [Neutral] option at the first encounter and avoided provoking either side. Talk to both leaders, obtain the Mites’ Relic from Chief Sootscale, and have Queen Bdaah remove her guards from the root-barrier. Leave the conflict unresolved to confront Tartuccio. If you didn't make the neutral choice, the best you can do is side with one leader, defeat, and spare the other.

Enter the tunnel behind the root barrier to find Tartuccio, disguised as a Kobold, using a magical portal to transport an artifact.

Tartuccio will attack regardless of your dialogue choices (question his disguise, reveal you know he's a spy, ask about his mission, or try to avoid combat).

Tartuccio is accompanied by five Kobolds, four Kobold Sentinels, and two Kobold Archers. Tartuccio is the main threat, being a sorcerer with powerful magic.

Tartuccio's Strategy: His minions charge to immobilize you while he casts Fireball, damaging allies and you.

Counter-Strategy: As combat begins, retreat with all characters except one front-liner targeted by Tartuccio. Let the Kobolds gather around this character. After Tartuccio casts Fireball, charge him with all your characters to prevent a second casting. Then, defeat the remaining Kobolds, protecting your archers and mages.

Loot a chest to the southwest for a Scroll of Mage Armor, a Scroll of Divine Favor, and a Heavy Shield +1.

Loot a pile of rocks in the southwestern corner for a Token of the Dryad.

Upon leaving Tartuccio's chamber, you may have the option to resolve the war. If you spared both factions, they will be gathered outside.

You will be given the choice to [Tell the truth] or [Lie]. If you choose to lie, you can keep one sacred branch and give the other to a chosen faction, which will result in the other faction attacking you. If you intended to kill one of the leaders, it was more lucrative to do so earlier.