In short, the elves are very elven:D In my last playthrough, I think I did something similar – I took one or two of their towns and then started taking Inferno towns. And the elves kept trying to retake their castles, but whether they succeeded is the question?:D
In the third mission, I also fought with Inferno troops. I don't see the point in playing with the elven army, which we'll have plenty of time to play with later, and which has morale problems under the command of Agrael.