Dude, bro!

I did what needed to be done; there was no other choice than for Lady Isolde to sacrifice herself for her son. Would you have preferred if I killed the child?

I was left with only two options, kill Isolde-kill the demon, or kill the child-kill the demon. Running out to the Circle of Magi was out of the question, it would have been three days ride to the tower and by that time, the demon could have over run the town.

Even you alluded that it may have been a fruitless endeavor to ask the Magi for their assistance. Action had to be taken, and I was not about to run out on a quest for assistance when we were clearly more than capable enough to fight this demon on our own.

Lady Isolde sacrificed her life to save her son, and the Arl would have done the same. I admit, I know little of this Blood Magic, but desperate times calls for desperate measures. And in this case they were screaming for it! 
 
My primary concern was the safety of the town and the child. I would not have slain him, and I would not leave the town without our aid to journey to the Tower of the Magi. This discussion is closed. I made my decision and I stand by it.
 
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Side note: Calling out Bioware

Damn it Bioware, I should be able to talk to Morrigan and Leliana about what just happened!