Armenia was divided between both the Ottoman Empire and the Russian Empire, so yes Armenians fought on both sides. However, the Ottoman Armenians enlisted in proportionatly greater numbers than their Turk and Kurdish nieghbours as many hoped that an Ottoman Victory would re-unite Armenia under the Ottoman Empire.
The United States was neutral in 1915 so they had an embassy and several consulates across the region. Their ambassadors were free to move around and they documented the atrocities. The US Government has since uploaded these documents for free online, and all their official transcripts dating from 1980 to the 1800's.
https://history.state.gov/historicaldocuments/frus1915Supp/pg_981"these new crimes against humanity and civilisation" - the first ever use of that phrase.
The word 'genocide' was later coined to describe what the Turks did to the Armenians.
As for why did they waste their resources to massacre their own people during wartime, because the Young Turks were paranoid, racist fuckwits. You may also have noticed that massacring your own people during a war is not uncommon, the Nazi's did it 30 years later using the Turks as a blueprint.