It's the quest "Ladies Of The Woods". This was a hard choice but I decided to free the spirit in the tree and after that I found out it was an evil spirit I freed. Will this choice make me a more evil character? Will I be able to correct my mistake later? I prefer to live with the consequences of my choices but at the same time not stray far from the good path which I try to role-play here.

People will die large-scale regardless of what your choice is in that specific quest. Either the spirit kills the people of the village or the guys from the church will hang 'em up for their pagan believes and rites.

Well, I suppose freeing the spirit was a good choice insofar that it freed the orphans, but of course it had other negative consequences which is typical for the Witcher series. :-]

This is one quest which simply does not have a happy ending. I usually kill the spirit simply because I sympathize with The Bloody Baron.

I sympathized with the Bloody Baron too. I just hope I'll get to punish those witches for what they did, but no spoiler about that, please. I want to see for myself. :-)