I am not saying one side or the other was worse. Both had their issues. I am just saying the movie portrayed Baldwin too "good." The first chance he got, he attacked. There may have been a period of uneasy peace, but I would attribute that to more of both sides beating up each other bad enough that there was a re-group. Two years after Montisgard, Baldwin was defeated and almost captured at the Battle of Marj Ayyun. I think this had more to do with the relative peace after that than Baldwin's goodwill.
As for Balian and Saladin, Saladin wasn't offering terms. Balian said, "Okay, I will destroy your holy sites--how about that." Saladin didn't want that on his head, so he gave terms. And as for the slavery, even if they were eventually released (which I am not convinced of), slavery for any period of time is terrible. Plus, you had to pay a ransom in order to avoid the slavery. The basic events were correct, however, the movie clearly wanted protagonists and antagonists, and skewed the characters to fit those roles. Baldwin wasn't really looking to live in peace with the Muslims, and Saladin wasn't as magnanimous in victory as portrayed either.