Difficult yes, obvious clearly not.
The 2 choices have their advantages and drawback.
If we choose the witches, Terran shows a lack of unity, and we lose a powerful ally.
But if we choose the demons, we commit genocide and the other realms may fear Terran even more, and beyond a certain point they may ally themselves in fear to be exterminated too (not to mention that Atlas is destined to replace Lucius, and if the other realms learn that he betrayed witches just after forming and alliance with them, how can they trust a king who doesn't keep his word?)
For me, choosing the demons will benefit Terran in the short term, with more powerfull allies to go against Ophelia or any threat to the realm but could bring conflict in the long run, while choosing the witches makes Terran more vulnerable now but can limit conflict with other realms in the futur.
Having said that, the best option would have been not to lie to Lucius and to convince him directly while preparing a plan B in case they didn't succeed, but Leyala and Kali are young and inexperienced unlike Atlas, so it's just as much is fault for failing to make them understand that no matter witch side we chose.
I disagree when you say that Atlas betrayed the witches by allying with the Demons. I say that because he never outright says that he will shield them completely (unless my memory is wrong). If I recall correctly, what he does promise is to spare the wich queen's sister (forgot her name) and to do what he can for her people so they don't get wiped out. He does that.
If it was up to Bael, he'd make the witches go extinct (as he wanted in the first place). When involving Lucius, the immunity for the witch queen's sister is honored, and the death toll on the witch population is then capped at a max of 50%. Which is still bad, surely, but less bad than total annihilation. If Atlas hadn't made a deal with the queen's sister, Lucius most likely would simply have assisted Bael without holding anything back.