Izzard the Wizard

The group gather up their belongings and take what they want from the dead. It's Thesis that stands over the small, unconscious Gnome. “What shall we do with him?”
The muscular Warrior could end the Gnomes life with just a simple stamp, but it doesn’t seem right to kill him in cold blood.
The wounded Telfis limps over. “They would have killed us without a second thought, but I can’t bring myself to kill him. Not with that toad staring up at me.”
Eolar walks forward. “Killing an already unconscious creature is never a good option. We should take him with us to the elven outpost. They can decide his fate.”
Finally the Dwarf; Durin strides over. “We should kill him, but I’ll leave it up to you.”
Eolar binds up the wounds of the tiny figure and lifts him up onto his mule. The toad croaks loudly until he is lifted up beside his master.
They travel on the next day and set up camp just one more day from the Elven outpost.
In the middle of the night, the little Gnome groans and awakens. Bodush is on guard duty. Carefully he approaches the frail figure. He’s talking but it’s too faint to hear. He moves a little closer and Izzard whispers into his ear; “Thank you for sparing my life. I wasn’t truly part of that party. They hired me to help but too late did I realise what sort of people they were. I was living in constant fear that they’d kill me as soon as look at me.”
With that the Gnome lapses back into unconsciousness.
The next day after encountering the Elven guards, you are all made welcome. The elders give orders that the Gnome be taken away and although you don't think he's been killed, you never see him again.

(You made the right choice. Izzard was the only member of Bailey’s party that wasn’t evil. It’s up to you how you explain him to the Elves and if you leave him his spell book etc.)