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It seems to me the etymology 1 should be made to follow from etymology 2, or the definitions should be otherwise melded.

That is, I see the latter usage of feud as a family vs. family conflict should be seen as derived from the earlier use of the word as meaning local war between lords and vassals of competing territories.

In linking to language roots displayed in Etymology 2, I noted interesting connections with fee, foe and fealty and faith.