For me, the "best" ending works not so much for sentimental reasons but because it shows Riou taking a strong, principled stand. By refusing to fight Jowy, Riou is defying both Jowy's vision of how things have to be and the will of the Rune of the Beginning. I like to think that Riou refused to fight Jowy less because he didn't want to kill his friend and more because he saw the battle as inherently pointless. I think a lot of the things that Jowy says to Riou during that confrontation expose some of the flaws in his logic and help explain the mistakes he made.
To the very end, Jowy seems convinced that one way or another, he can play some role in ending violence altogether. At first, he seeks power and influence to achieve his goals by acquiring the Black Sword Rune and working his way up through the Highland ranks. He succeeds to a point, orchestrating the death of Luca Blight and his own ascension to the Highland throne. But when he arguably has the opportunity to negotiate a meaningful peace agreement, he instead decides to continue the war, believing that by leading the Highland Army to crush the State forces, he could eventually establish a permanently peaceful state. However noble his intentions were in theory, in the end, the idea that he could accomplish something this lofty was delusional.
He still clings to this basic ideal even after Highland is defeated and he seems resigned to his fate. He recasts Riou in the role that he saw for himself, and recasts himself as the tragic martyr, the last obstacle that Riou must overcome to lead the new State into an era of everlasting peace. He believes that by destroying the Blight bloodline, the old Highland Kingdom will be forever suppressed, overlooking the possibility that for many, the idea of "Highland" could be bigger than the existence of a single family. This is what makes Jowy so interesting: he's so obviously intelligent, and has the capability to be ruthlessly cold and calculating, but through it all, he clings to this idealistic philosophy that gives him a strong moral core, but also leads him to make these hopelessly naive decisions and judgments.
I honestly think that by refusing to fight Jowy, Riou defeats him, even as they reconcile. Because if he fought and killed Jowy, then he would have done essentially what Jowy wanted him to do, and succumbed to the will of the Rune of the Beginning.