The Bewitched Templar is under the control of a Desire Demon, who is making him believe she is his wife and that they have two loving children. The demon mentions that this was the Templar's hidden desire all along; something that he himself did not even know.
It will be up to The Warden to decide if the Templar gets to live in a blissful dream world with the demon, or if what the demon is doing is morally wrong and she must die, in which case the Templar dies along with his "wife". Looting his body will yield a note addressed to him and Templar Armor.
If you stand outside the doorway before entering the room where the demon and Bewitched Templar are located (the first room on the left as you enter the Templar Quarters), you will hear a short conversation between the demon and her "husband" talking about their children.
If you bring Leliana on the quest and choose to leave the couple alone you'll gain (+1) from her.
If you bring Sten with you, you'll lose (-3) approval with him if you choose to fight the demon.