Maybe

I know people have really strong opinions about the plot, but I really think we're going about this the wrong way. If every time loop ends with Guwon and Jinwoo dying, and the Hounds killing the townsfolk, then this outcome is inevitable. Remember, Guwon was dying when they took over, and he died by throwing himself and Jinwoo over the cliff. Even if they hadn't taken the town away from him, Guwon would have died anyway. And they would still have been killed by the Hounds.

I think the key to breaking the loop is something much more complicated than just letting Guwon run the town, because that doesn't prevent him from dying.