Perhaps Elrond had some foresight and saw that the ring would be used to give the hobbits some power and respect in the world. Perhaps he was too tired to fight Isildur. I personally think that Elrond was friends with Isildur and when he could not persuade him, he could not bring himself to kill him.
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"Wake up! Wake up! Wake up, sleepies, we must go, yes, we must go at once."
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