Postive effects of the war

Sorry to inform you but they already added Dragons.  Now I just want to be able to have one in my army :D

Finally the +8% equipment may be worth it if I give it to a dragon.

I suggested no such thing, as Illyriad is neither real life nor Star Wars.  

As to WWI leading to WWII, the German army wasn't crushed in the field, leaving many to believe that they could have fought on and had only lost due to a political stab in the back at home.  This resentment, combined with a punishment that Germans believed was undeserved and excessive, allowed Hitler to rise to power as an advocate of a militarily supreme and ideologically pure reich.  They also got the impression that you could steamroll Britain and France if you hit them hard and fast, that American troops were numerous but not that effective, and that Russia couldn't fight its way out of a paper bag.  All an enticement to go for round two.

Round Two ended with a lot of Germany burned and leveled, their military shredded, and an uncomfortable choice between surrender to the west and begging for mercy or conquest by Russia and a few decades of Stalin's tender mercies.  They made a choice and it worked out well for them.  This is not a recommendation for any future human or computer wars, just an observation.

The other Axis powers, Japan and Italy, both jumped into WWI on the allied side, hoping for big winnings when the reparations and former German or Ottoman colonies were handed out.  They felt that the Versailles Treaty screwed them and their participation left them more problems than gains.  When Germany rebuilt itself and grew stronger after the war and started looking for allies, they found friends in three former enemies who no longer trusted the British and the French.

But again, that is history and not Illyriad, it has nothing to do with the current in-game war, only an observation on human nature.