I finally finished the City Elf origin after all this time. And I went into thinking I'd finally hate Loghain from this perspective.
But I pity him even more. I feel like the City Elf ---- for me anyways -- worked better by not living in rage, especially towards the end of the game when you go back home. That last side quest in the Alienage with Ser Otto kind of put a unique spin on the whole thing I hadn't noticed before. It was full of angry spirits and rage demons. I started seeing my own character like that up to that point. Full of anger and bitterness.
Funny, I've finished with a City Elf Origin too and it makes me feel even less pity for him than other playthroughs.
I don't like playing city elves who are full of rage and bitterness either. I know it's really popular to play a city elf who's all "RAH! RAH! I HATE ALL SHEMS!" but I also just don't see the point of it. As you said, you end up making yourself even more angry and bitter than you need to be.
I like playing city elves that deal with their upbringing by learning to laugh and shrug it off. To make little quips even at her own expense and find the humor, irony, and joy in bad situations. Some of my favorite lines from family members are "Still have your mother's smart mouth I see," from Cyrion (Dad), and "Still casual, as always" from Soris. Over the game my main elf also learned to like humans on a more personal level, see more from their point-of-view, sympathize with their plight even if it isn't hers, and by the end of Awakening some of her dearest loved ones and closest friends were humans (Morrigan, Alistair, Anders) and even nobles! (Teagan and Nathaniel.)
But at the same time, growing up in that kind of environment, receiving that kind of horrific treatment, and watching that many family members get hurt and killed your whole life (mother murdered by humans, aunt and uncle burned to death during a purge, experiencing multiple purges in a lifetime, wedding crashed and cousin raped, etc) will create emotional scars that aren't that easy to just get rid of. You can't just magically get over that upbringing in a few minutes, or even a few months. Even if you learn to laugh, shrug it off, and try to let it go, little triggers and reminders are going to spring up and stab you in the heart and the gut even when you think you've safely gotten past a lot of the pain and resentment of your childhood.
But at a certain point, you have to let go of that crap. To stop raging at the Vaughns of the world. How many Vaughns and Loghains do you kill until you finally "get better"? The more you hold on to crap, you just end up like Loghain. He's no elf, but he holds on to all the same type of things with Orlais. The Dog dialogue is just a glimpse into that. The best thing for both Loghain and the CE is to move on somehow.
Fair point, but what kills me about Loghain (from the CE POV) is not necessarily that he did it, but he is remorseless and hypocritical about it. He feels entitled to froth into a rage over Orlesians ("How fortunate Maric did not live to see his son ready to hand Ferelden over to those who enslaved us for a century." "Which of your stood against the Orlesian emperor when his troops flattened your fields and raped your wives!") but is blithe, dismissive, and annoyed if a city elf dares bring up what he did to them. If you spare him and confront him at camp, he even calls an elf egotistical for daring to hold a grudge for selling their people into slavery, despite the grudge he holds against Orlais! (Source, at 3:55.)
And I think it was deliberate on the writers' part. Loghain and Cauthrien honest to goodness don't see the parallel between Fereldens occupied by Orlais and elves enslaved by Tevinter. When a city elf approaches the Landsmeet, Cauthrien says "You've got damned nerve thwarting the man who fought to ensure you were born into freedom." To a city elf that just got back from "thwarting" said man by stopping him from selling their people into slavery.
Same with Loghain. Every single time you bring up Loghain's past crimes, he justifies his actions by essentially saying "Everything I have done has been to ensure Ferelden's freedom," even when you call him out on selling Ferelden citizens into slavery. One of Loghain's most iconic lines is: "Stand with me and we shall defeat even the Blight itself!" Yet, if you spare him and call him out on slave-trading later at camp, Loghain will say: "Which fate is worse: To live as a slave, or die without hope?" HUH? So if you're human it's better to die free at the hands of darkspawn rather than even risk Orlesian occupation, yet when it comes to elves, it's better to live in slavery than die by the darkspawn?
His complete hypocrisy and lack of remorse, his double standard regarding human freedom being invaluable but elven freedom having a price, pisses me off more than anything. My Warden personally identified and related to his feelings toward Orlais, and was willing to forgive him almost to the bitter end (even after she learned Howe purged her alienage after Loghain had appointed him and during his reign, she still said, "Stand with us, Loghain!"), but when she called him out on slave-trading at the Landsmeet and he pretty much said, "I needed the money and I'm not sorry I did it" ("Whatever my regret may be for the elves, I have done what was needed for the good of Ferelden," somehow failing to acknowledge that they are Ferelden citizens too) all pity flew out the window.
Or... that could be just a bunch of B.S. You decide.

... You make some good points, but I don't think it's applicable to all city elves.
I feel like you've made this false dichotomy that a city elf either has to be filled with rage and bitterness and hold grudges against "all the Vaughans of the world" and thus refuse to forgive Loghains, or they're willing to try to let go of their rage and bitterness and "move on somehow," and thus be willing to forgive Loghain. And I don't think it's that simple.
Besides, who's to say a city elf kills the likes of Loghain just out of a personal grudge or to "feel better"? Maybe some do it to serve as an example. Vaughan, Howe and Loghain hurt the alienage, and now Vaughan's, Howe's and Loghain's heads have been severed from their bodies. Serve as a warning to other nobles not to **** with the alienage.
Also, I just keep hating Alistair more and more, each time I play the game. So much whining and anger, and he doesn't have even half the things to complain about as most characters. Not Loghain, not any Warden, none of the squad.. yet he constantly thinks of himself as burdened or victimized.
And yet you feel pity for Loghain who constantly thinks of himself as burdened and victimized because of Orlais, yet has no problem burdening and victimizing others?
At least Alistair treats others the way he wants to be treated. I also don't see the "so much whining and anger" that you're talking about, as he tries to be humorous and easy-going, tries not to put his problems on others, and tries to joke about his problems instead of complaining about them. I've only seen him get mad when the Warden commits atrocities on others, or Loghain for abandoning the king and Grey Wardens to die, then pinned the blame on you and hunted you like animals for months. Whether or not you personally agree, at least those are reasons for getting upset.
Plus, he really does have a sucky life. Even from a City Elf POV, I feel sympathy for him because he's been used, neglected, and mistreated by all adult figures growing up (treated like an inconvenience at best, an unwanted burden to pass off to someone else at worst) and he's had no one in his corner his whole life. Those few he had, were killed. Even my city elf, who was treated like little more than an animal by most humans growing up, thought, "At least we elves have each other, you had no real family or loved ones growing up."
So, it all depends on your viewpoint.