The Dominion pretty much is an aggressive power determined to bring all under their banner. Appeasing them is pretty much akin to Chamberlain and Daladier appeasing Hitler. They'd just demand something else. Even the Search touched on this when the Dominion was testing how much the Federation would appease their demands in the name of peace in that scenario. In the end it only takes one to start a war, even if the Dominion's political maneuvering put the Federation in the position of striking the first blow.
Could the war have been avoided? Sure. The most obvious answer is to collapse the wormhole early on before there is time pressure of an approaching fleet and changeling infiltrators to sabotage such efforts. Though this would pretty much alienate Bajor from the Federation, which is something Sisko was reluctant to do to say the least.