Love this episode. I guess I'll continue the discussion that was going on, since it's an interesting topic.
Assuming that they were his exact words, I agree that Hazel did not make a very good proposition with General Woundwort. He was well aware that Woundwort was the aggressive type that would never submit to a stranger in his own warren.
That said, there is the possibility that he wasn't actually that blunt. I always found it odd that Hazel would ask whether Woundwort wanted to fight or not when his purpose for entering Efrafa in the first place was just to get some rabbits out. I don't see how effectively taunting Woundwort like that would make that goal any easier. Maybe the whole "war or peace, life or death" question was a gross oversimplification of what Hazel actually said. After all, you never hear what he says; it was delivered as a message to the general by Campion and Vervain.
Now, I will admit that there are some flaws with this theory. For one, Hazel doesn't deny asking those questions when Woundwort gives his answers in the hearing, nor does he appear to deny them (he looks surprised when Woundwort orders the execution for some reason though haha). He also confirms that he's from a great warren like the message says. Second, when Campion delivered the message to Woundwort, he and Vervain looked at each other uneasily just before he repeated it. I don't think they would have done that if they were lying or just stretching the truth.
Personally, I think he really asked those questions based on the evidence. I just wanted to throw some ideas out there. What I don't understand, then, is why Hazel wanted to sell himself as the leader of such a formidable warren and taunt Woundwort when his objective was to take Primrose and Blackavar. It's too high profile, and it isn't as if Woundwort was his enemy at that point. Telling those lies probably made Woundwort hate him even more.
On a less analytical note, the way Hazel jumps on the opportunity after Fiver's vision catches Woundwort off guard makes me laugh every time. He boldly reasserts that his warren is extremely powerful, and you get the sense that Woundwort was actually starting to believe him (who wouldn't be shaken after a psychic recalls your traumatic past like that?). Bigwig's "army" certainly helped with that as well. What really gets me, though, is his claim that Fiver's dark spirit (Fiver? dark?) will torment Woundwort forever if he harms them. I think he was crossing the line on that one in terms of plausibility, but I guess it affected Woundwort enough to let them gain a head start in their escape.
Oh, one last thing. At one point Hazel directly addresses Campion by name. I notice it every time I watch the episode. How does he know Campion's name? The only time it gets mentioned before then is when Primrose addresses him after Blackavar's defense. Hazel wasn't there to hear that, nor was Kehaar (he flies off). I know this seems trivial, but I distinctly notice it every time and I always ask that question.