I think we might need to put this one up for community consensus, as I don't want to just make a rulling on that. The issue is there I see good arguments for both sides:
You have to play it out: What forces are going to survive this battle? If you don't play it out, it opens it up to gamesmanship of just throwing in the towel to preserve units that you don't want to lose. That isn't fair to others who are playing through.
You can give up: This is supposed to be fun, and I don't want to discourage people by making them sit there and take 6 turns of un-fun @ss beating when the matter is well decided.
Possible Solution? You have to play 5 full turns but you can "tactically withdraw at that time"????
What I can say, is that I was in this situation last night, getting battered by Dan's army of 300 dakka fexes (or something like that ;p ), and he offered to have us throw the towell in, but I chose to play it out, and we had a good time.
What does anyone else think?