Ok! I did the quest and ended up killing the husband! Honestly, IRL I don't think any of the two deserved to die :) After killing the guy, all the villagers and guards started attacking me.. is that on purpose? I assumed that I was allowed to kill him since it's part of the quest.
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There is a third path to the quest, but it's somewhat hidden. You have to talk to a character you wouldn't really expect to be involved in the quest.
Killing either of them is intended to turn the village hostile, like killing any other villager. There will be a way to murder either of them in a sneakier way that won't turn the village hostile, but it's not yet implemented.