Like Dogface, I always assumed the tin soldier was representing the victory. A cheap toy to stand in for a cheap win. I see that others on the internet draw parallels between the Tin Man of Oz lacking a heart and the tin soldier representing the loss of the valley people’s compassion. The rest of the song seems pretty self-explanatory.
The song was first recorded by Coven in 1969; the movie Billy Jack came out in 1971.
Like “IIIIIII Will Alwaya Love YYYYOOOOUUUU,” people think the song was written for the movie. It wasn’t…
and here’s to you, Mrs. Robinson
Heh, when I was a kid I always thought the mountain people were idiots. Why did they go on about a mysterious “treasure” in the first place? 
To me the best thing about the song (apart from being catchy) is the ambiguity of the tin soldier image. I’m not sure the writer intended it, but that’s the way it ended up.
The tin soldier could be:
–A contemptible final-survivor warmonger leaving the scene of pointless carnage. (And that’s probably the correct answer.)
–An unknown character departing a create a better world.
Someone upstream mentioned a possible Tinman of Oz reference, but I don’t see it. He fought it various conflicts in Oz but wasn’t called a tin soldier.
The more famous literary tin soldier was in the Hans Christian Anderson story of the Steadfast Tin Soldier, and the songadapted from it. (Recorded by Donovan, among others.) But if there’s a connection there I can’t see it.
Never figured it out exactly myself… but I’ll take a shot…
The tin soldier is a loner, alienated from the others, present at the the carnage but powerless to prevent it. The bloody morning after, the tin solider finds that there really were no survivors of the massacre. The mountain people are dead, and the valley people have shown that they’re spiritually dead.
The tin soldier is now certain that there’s nothing for him here… so it’s time to move on.
To boast of your strength is to make it your weakness. (Groo the Wanderer)
I, too, never really thought about the identy of the One Tin Soldier. I guess I never thought he mattered that much to the message.
I always interpreted this song as a metaphor for the clash of Europeans with Native Americans. In the beginning, the Native Americans were happy to share the wealth of the continent with the Europeans, but the Europeans would not be satisfied with anything less than owning everything. That’s how I always thought it tied into Billy Jack, as well.
Interesting bit of trivia: The bass player for coven was named Oz Osbourne. No relation to the more famous Prince of Darkness.
Until you master your rage, your rage will become your master. (The Sphinx)