It requried abandoing half a province, who fought just as hard as the Empire against the Dominion. He shouldn't have even considered it. If he didn't think the Dominion could be beaten, it's a message to the provinces "we will sacrifice you to keep the Empire whole."
Hammerfell did not 'fight as hard as the Empire' because Hammerfell
was part of the Empire. Moreover, Titus II did not 'hand over' regions of Hammerfell because at the time, those areas were already occupied by Thalmor forces. Titus merely formalised that fact. This may not have been the wisest decision in retrospect, but he did not suddenly toss unoccupied areas at the Thalmor, hoping to appease them.
And if there is one thing that Elenwen, Titus, Tulius and Ulfric would all attest to, it's the fact that the WGC was
never intended as a permanent peace. The WGC is a temporary measure, a pause button on the hostilities between the Empire and the Thalmor.