If both sides abide by it, after the war ended, whatever the outcome, don't get too upset about it, and we can still be friends. It keeps in mind a future in perspective.

If one side have no intention of ever dealing with the other side again, or if there is no the other side left in the end, the purpose behind the Rules of War no longer exists.

It is true that when putting on uniforms, citizens becomes soldiers. But the larger context is that conflict would cease in the future, soldiers would be able to put down the uniforms, and whatever happened in the past would be the past. The rules of war does not apply to the ancient warfare where the purpose is to take their land and women, and kill all their men.

Destroying the entire army follows the letter of the rule of war, while disregarding its spirit. It is true that dead people do not fight. But they also do not follow.

Nobles in Tear and Cairhien had rebeled. Rand did not just kill them all. He wanted more followers. Rand would not gain followers from the borderlands by destroying their people. Rand would surely gain a lot of enemies. It is ok to made enemies along the way. But if he made more enemies than followers, he need to think whether he is still on the right path.

In a way, it is similar to Rand's epiphany on Dragonmount. It is easier to destroy tham all, harder to fight on turning them into followers. But you still try the hard way any how. The gross disregard for lives made the action evil.

Often, the side losing the war lost sight of the future perspective. To win at all cost. And the end result is a winner having a future more bleak than if it had lost. The worst possible outcome, mutually assured destruction, comes about.