To echo other comments, it depends what story were telling with the game. So, for a Warhammer game or other franchise, I'm playing in someone else's sandbox. There's a pre-existing world and my army composition is likely to reflect that (although I do think allied contingents add a bit of spice). But I'm more than happy with option C in my own games as long as it's justified by the scenario/campaign background.
In defence of Oathmark: you can see from the monsters in the game that JMcC has leaned heavily into Northern European myth and folklore for his setting. In those same tales elves and dwarves are a pretty nasty bunch. Even the heroes are at best morally ambiguous, and sometimes downright psychotic (see Wayland's revenge on King Nidud for example). For gaming in that sort of setting a tyrannical elf lord bringing goblin slaves in his army to attack some double-crossing dwarves, who in turn are happy to dabble in a bit of necromancy in self defence, makes perfect sense and also a refreshing change from the usual goodies and baddies stuff.