Here are relevant passages from William C. Oates, a disabled Confederate veteran. Based on the title of his book, Colonel Oates wasn't adverse towards use of the word 'Union'.
http://www.markchurms.com/mm5/merchant.mvc?Screen=PROD&Store_Code=M&Product_Code=hc-book-oates&Category_Code=books

For those who may be interested in his life, here's a biography --
http://www.nps.gov/archive/gett/getttour/sidebar/genoates.htm

Citing the law, from Oates' book, pages 501-502 --

Sec. 5. That nothing in this act shall be construed to authorize a change in the relation which the said slaves shall bear towards their owners, except by consent of the owners and of the State in which they may reside, and in pursuance of the laws thereof.
Approved March 13, 1865.

The fifth section nullified the efficiency of the act. After providing for them to volunteer and be organized into companies, regiments, brigades, etc., and to receive rations, clothing, and pay, the President to appoint the officers, comes section five, which says (notwithstanding they may make good soldiers and fight hard to establish the independence of the Confederacy) that they should be and remain slaves, unless the owner saw proper to set them free. A negro who did not have sense enough, under that law, to have deserted to the enemy at the first opportunity would have been too much of an idiot to have made a soldier. No sensible negro would have volunteered under that law, if honestly explained to him, unless it was for the purpose of availing himself of the opportunity to desert to the other side, where he could, beyond doubt, have obtained his freedom. He would have done this rather than fight, with chances of being killed, or of having his body mangled with shot and shell, to keep himself and his children after him in slavery.

page 503 -
Had the law been passed two years earlier than it was and in lieu of the fifth section have made provision for emancipation, the Confederacy could have raised and kept in the field three hundred thousand negro soldiers without any great impairment of the productive force of the country; and with the brave white men then in the Confederate armies, the world in arms never could have conquered us. The enlistment of negroes would have spared the lives of many white men, and the 100,000 negro soldiers we had to fight and twice as many more would have been on our side. This policy on the part of the South would have terrorized the North. They could no longer have enthused the abolitionists, and the policy of emancipation declared in Confederate law and practice would have wonderfully enhanced the prospects and probability of early recognition of the Confederacy by European governments. If at Gettysburg Lee had had 50,000 negro troops under white officers, as additional force, he would have walked over Meade's army, have gone to Philadelphia and peace would have then be made.

Oates also quotes from Pollard's 1866 classic, The Lost Cause, pp. 659-670, on this very issue. One paragraph reads,

The action of Congress was so far below the necessities of the case, as to be, in the last case, puerile, absurd and contemptible. The proposition to arm negroes was made in November, 1864; it was debated until March 1865; and the result was a weak compromise on the heel of the session by which the question of emancipation as a reward for the negroes services was studiously excluded, and the President simply authorized to accept from their masters such slaves as they might choose to dedicate to the military service of the Confederacy.

page 505-506

Had the Confederate authorities perceived this fact, and enlisted the slaves as soldiers in establishing a separate nationality, they might have succeeded; but the utility
of such government remains in the obscurity of speculation, though the greatest probabilities were in favor of a grand success and wonderful national development.

After slavery was practically dead the Confederacy clung to its putrid body and expired with it.

The image of Oates was taken when he still had two good arms