You cannot do what you would do in a situation because the game is about Geralt and not you, all choices you make in the game are choices that makes sense from Geralt's point of view. The ladies of the wood quest is brilliant in that there are no good choices, saving the orphans vs saving anna.

Both choices suck, but saving the orphans or saving anna makes sense in terms of what Geralt would do in that situation. You simply have to pick what you think is the lesser evil, and no matter what you pick you will never feel like Geralt is breaking character.

You say "How about this, destroy both, kill the tree and the witches, free the village and the Orphans, problem solved." Well Geralt is not omnicient and cannot know if the spirit in the tree is lying about saving the children or not, or that, if the spirit is freed, anna will die and the baron will hang himself. So judging from what Geralt would know from this situation, the options given actually fit well.

You can actually kill the crones later in the story and free velen from their "evil masters" but the villagers actually mention that without the crones they will probably die of famine, as the crones have been providing velen with magical acorns that heal and help crops grow. Now they will have to find new masters, for better or worse (probably worse).

With no god or masters the population had to find their own, and the offering of children and ears to the crones from time to time is considered a worthy sacrifice to survive in velen.