Genocide isn't a clear winner to stop war. That's like saying all Germans should have been wiped out due to both WW's having to mainly focus with them. This logic of "Wipe them out, problem solved" is the most backwards thought I'd ever heard of. It's one thing to say war can cause genocide, but to say its the only real way to win a war? Well then crap, the only 'wars' that have been won in the world were the native americans being forced out..or any instance like it.. Oh wait that was genocide too.
Your example is an almost isolated one. There are many countries that have gone to war with one another and have given peace. Does that mean everyone is friendly 24/7? No but there is peace. Look at the UN, doesn't that prove something? Honestly, Tiber Septim would never have slaughtered an entire race. He brought the entirety of Tamriel into peace through war yes, but it was a war won without one sided genocide. Had he followed Ysgramor's example, he would have failed and there would be no Septim Era at all.
In fact, typing that out now, doesn't that make Ysgramor and Tiber Septim polar opposites?