NATO began with onlooker status (since Ukraine is not part of NATO) - it hasn't been reduced to this. Moreover, in funnelling weapons into Ukraine and providing real-time intelligence to Ukrainian forces, NATO has moved beyond simply looking on. As for the West, sanctions have been applied that will reduce the Russian economy to ruins over the next few weeks and months - again, this is far from merely looking on.
How will it end? Most likely with the Russian military suffering daily losses for months to come, tied up in fruitlessly attempting to pacify a country that is bigger than France (and so not available for deployment elsewhere), a collapsed Russian economy, rising unrest inside Russia, rising repression inside Russia, Ukraine semi-occupied but not defeated, the West slowly weaning itself off from reliance on Russian energy supplies, NATO stronger than ever (with additional countries joining and defence spending beefed up considerably), Russia weaker than ever, with little that is sustainable that Putin will be able to point to as a "victory".