Interesting idea.
In truth in think the race and faction that would have been effected most by Wattinree’s survival is the Jiralhanae.
The conclusion of Halo 2 along with the events of Ghosts of Onyx seemed to suggest both the Sangheili and Jiralhanae were both gearing up for full scale war which would have made the human-covenant conflict look like a minor brush-fire by comparison, however the Great Schism seemed to have pretty much fizzled out by 2553 with the conflict becoming one between many Covenant splinter factions, most with mixed ethnicity.
The Return suggests there is still conflict between the Sangheili and Jiralhanae however any fighting seems to have been inconclusive, so I’d imagine its carried out by rogue ships and individuals who would rather fight each other then members of their own race, while the bulk of their respected society’s are locked in civil wars.
Wattinree’s survival could have changed all of this. A strong leader and sizable fleet right on the border of the Jiralhanae’s space at the start of the Great Schism would likely have provided both moderate (human-friendly) and more zealous (not human friendly) Sangheili with both a strong leader to rally behind and an very visible enemy to fight other then the UNSC.
It’s true that Wattinree hated humans and planned to finish the conflict, but its also important to remember that he saw a united Jiralhanae as a much greater potential threat and was already preparing to move against them at the point of his death. Had he and his fleet survived I think we would have seen a much more violent and destructive war between the Sangheili and Jiralhanae, rather then the Sangheili civil war and Jiralhanae in-fighting that is occurring instead. Sangheili such as Jul and Teclam would probably have joined Wattinree in his war against the Jiralhanae as away of building up a power base of allies opposed to the Arbiter’s followers, even while theoretically they were all fighting on the same side.
By 2558 the Sangheili-Jiralhanae war could be winding down. If things had gone well for Wattinree then the Jiralhanae may now be militarily crushed with a Sangheili army occupying a shattered Doisac, whilst sporadic guerrilla fighting still continues throughout the Jiralhanae colonies. Alternatively 6 years of heavy fighting could have seen a stalemate develop, with Wattinree agreeing to a tentative ceasefire with terms favourable to the Sangheili. (Mining rights, reparations, hostages etc)
Then again Wattinree’s campaign may have been an unmitigated disaster for a united Sangheili, forcing him into a humiliating peace with a now thoroughly unified Jiralhanae empire. (Ironically avoiding the famine they are in danger of in our timeline due to the favourable terms they were able to extract from the cease-fire. Food, economic and material aid etc)
Either way, either peaceable of forcibly eventually this exceptionally violent war between the Jiralhanae and Sangheili would be concluded, which would leave Wattinree free to deal with a still weakened UNSC and humanity.
Exactly what form this conflict would take would be down to the magnitude of Wattinree’s successes or failures during the preceding war with the Jiralhanae. If the war had gone exceptionally well, then the bulk of the Sangheili could well flock to Wattinree’s side leaving Sangheili such as the Arbiter outnumbered, even if his supporters were to side with the UNSC against Wattinree combined forces and resources. (Think of all the resource rich Jiralhanae worlds he’s conquered after six years of extremely successful campaigning)
Wattinree genuinely strikes me as a Sangheili whose greatest threat is his charisma. The Hierarch’s placed him into virtual exile because they feared not necessarily his military might but his ability to inspire common Covenant citizens and warriors to follow him, hence they feared the repercussions of simply executing him as a potential usurper.
The Sangheili that dominate the leadership splinter factions like the Servant’s of Abiding Truth rule by fear, murdering other Sangheili who openly disagree with them. Wattinree is probably a Sangheili who installs such authority that most Sangheili would fall into line behind him, regardless of their political beliefs.
The key point I’m making here is that unlike Jul or Teclam, I think Wattinree would probably favour diplomacy over war if that conflict involved the prospect of killing fellow Sangheili, which would include the Arbiter and his supporters however numerous they may be.
With the Jiralhanae now neutralized and war looming between the UNSC and Wattinree’s faction, I imagine Wattinree would issue the Arbiter with an ultimatum.
“Join us, stay out or the conflict, or die protecting the humans. The choice is yours.”
The Arbiter’s response and the resulting conflict would likely depend on the following. If Wattinree’s war against the Jiralhanae had been somewhat less then successful, then the Arbiter may well have equal or superior forces at his disposal which would allow him to force Wattinree to negotiate rather then spilling the blood of his own, which could see Wattinree’s coming war against the UNSC narrowly avoided. Alternatively if Wattinree emerged from an extremely successful and profitable war with the Jiralhanae, his forces could well outnumbered the Arbiter’s considerably.
Whether the Arbiter would still stand by the UNSC in the face of Wattinree’s overwhelming superiority in ships, troops and resources would likely depend on his reasonable chances of success. As long as there was still a viable chance of victory I think the Arbiter would stand by the UNSC, however I don’t think he would commit his forces to a battle he knew he could avoid but defiantly not win, which would likely result in an at least temporary truce between his forces and Wattinree’s, which unfortunately would leave the UNSC to face a combined Neo-Covenant fleet larger then any they had likely faced before.
As a side note, I don’t think Wattinree’s war against the UNSC would be repeat of the Hierarch’s campaign to eradicate humanity. While it obvious Wattinree had love no for humans, his exile an subsequent banishment to the fringe of Covenant territory suggests that the Hierarch’s didn’t trust him to command the war against the UNSC initially, perhaps fearing he was not sincere in his hatred of humanity. I think its possible that Wattinree was simply playing to the prejudice’s of his audience when he stated his intention to wipe out humanity once the present threat of the Jiralhanae had been removed. (Who’s know’s, in another alternative timeline where the High Council decided not to exile him but instead allowed him to lead the campaign against the UNSC, Wattinree’s ambition may have formed a temporary alliance with humanity in order to overthrow the ruling Heirairch’s and seize power.)
Either way I think its likely that in a post-schism universe Wattinree would view even a weakened UNSC as a potential threat if given sufficient time to re-group. Doesn’t mean he would have resorted to extermination, as he may have viewed and subjugated humanity as potentially useful.
Either way, Wattinree’s survival would have served to provide a figure for the divided Sangheili to rally around and made a full scale Sangheili-Jiralhanae war inevitable. Victory would have been likely but not certain, and once this conflict was done a second war with the UNSC and perhaps the Arbiter followers would have also been very likely.