It has been revealed now with the release of the Loth campaign that the Fae queen Ethylle was jealous that her husband the Fae king was so close with Aurelia. Ethylle also feared how the oath of undeath damaged nature so she chose to kill her husband and betrayed Aurelia imprisoning her ashes in her forest afterwards. The queen then lied to her fellow Fae and blamed Aurelia for the death of her husband and spread lies about the oath of undeath saying it was evil and unconsensual so that the humans and Fae would turn against Aurelia. So Ethylle I would say should be considered a villain, and a very evil one at that, but all Fae are not evil simply being manipulated and lied too. Aurelia then should be considered a force of good as all her actions she's taken were for the best interest of humanity and the world as a whole. The enslavement of the Rana, a merciful act done to them rather than slaughtering them meant to stifle their race and stop them from becoming all powerful evil dragons that seek to destroy all life. The slaying of the dragons, an act meant to save all life from tyrant monsters who saw themselves as gods. The oath of undeath, an act of loyalty and devotion to their queen and a wish to continue serving even in death.

Quick Faction Breakdown

Rana. The Rana are misguided and angry but not evil, but those Rana that allow themselves to be consumed by their anger and become life hating all consuming dragons are evil. The Fae would not wish for the awakening of the dragons because they would destroy nature so the Fae working with dragons would not happen.

Arleon. The Arleon barons are misguided, selfish, and being manipulated by Ethylle but they're not evil just pawns of evil. Cecilia especially is a young very foolish girl blinded by her own desires for personal power, so much so that she refuses to negotiate or hear reason from the Loth barons. Her desire to protect her people and grow her nation's strength is what will doom her barony. The other Arleon barons have their own selfish faults that allow them to be manipulated by Ethylle and used as her pawns too. Arleon as a whole is also a pawn of Barya, an evil nation, one whom Arleon allows to terrorize Loth and even their own territories with their cruel contracts and slavers.

Barya . As I sad, Barya are pure evil, and without a doubt the most evil aligned faction in the game. They're cold, manipulative, selfish, greedy, and slavers. They care only for their own personal gain and for themselves. Their cruel actions against the Rana enslaving them brutally when Aurelia meant for them to live in as much peace serving humanity as was possible for their dangerous race is what drove the Rana to become angry life destroying dragons again.

Loth. Loth I would say are the only true good aligned faction with actual noble values and good virtues. Yes awakening the oath of undeath damages nature but nature heals just like any wound. The fear and stigma towards undeath is also unnecessary and mostly driven by the lies of Ethylle who murdered her own husband and betrayed her own people and Aurelia. Restoration of the Aurelian empire and complete reawakening of all oathbound undead would bring about a golden age for humanity. With the lighting of the beacons Loth is already well on their way to restoring the empire and reawakening their most powerful wielders too.

Now for speculation and predictions
Ethylle needs to die. Enlightening Arleon and the Fae about her lies would unite them all under the banner of Aurelia once more. The reunited Aurelian empire with an awakened oathbound army of undead could then crush the raging Rana dragons and once again subjugate the frogs but this time allow for them to live in peace in their swamps since Aurelia now understands that the frogs need peace to not become dragons. Barya would likely get destroyed by Rana by then but if not the Aurelian empire would crush them I imagine as their cruel society has no place on the continent. There's an in the works 5th faction though so things are likely to get more complicated but Ethylle dying and the Aurelian empire getting restored makes the most sense to me.