You lose me on your. I bet you have a shirt saying: “Kill them all and let God sort them out.”
“When you go to destroy a monster, make sure you don’t become one to.”
If you still don’t understand, but yet want to then I suggest you study the differences between the American revolution and the French.
I will bet a rather large sum that Tolkien never wrote a line whereby he confuses mercy/pity with courage. He knew the meanings of words.
As I said, Bilbo showed virtue by not killing Bilbo, but that virtue was not courage. It was mercy, and I believe Gandalf later referred to it as pity.
America presently stays our hand in our attacks on our enemies, avoiding collateral damage as much as possible. But the virtue we show by doing so is not courage.
Courage, unlike most other virtues, has no inherent moral component. It can be exhibited in an unjust or even evil cause just as well as in a righteous cause, and it often has been.