Does not register the reconciliation state. If after going through the hoops of saving workers without upsetting nixie you talk to her and hug her it registers the end state as if lumberjacks died with the head lumberjack. If you talk to head lumberjack first then it registers that end state with the nixie.
So you can talk to nixie as if you solved the situation without bloodshed and get locked into a state where the lumberjack thinks his workers were killed or you can talk to the lumberjack as if the workers were saved but then the nixie will think they were killed.

I'm leaving this for later, in hopes this will get fixed. Here's hoping there is no time limit on the quest.