The Lair of the Werewolves
Go down the steps and you should find four werewolves. As you fight them, another four shadow werewolves should pop in and join the fight. Once again, there's not a trick to this. You just have to use crowd control attacks or abilities and pick them off one at a time.
There's a second group just past this. Once again, you'll face about six or eight werewolves and you'll just have to keep fighting. We're almost done though. Head down the steps and you'll meet the gatekeeper. Regardless of your plans, agree to be taken to their Lady of the Forest for a brief parlay. We now get to make our decision.
It seems that Zathrian is responsible for the centuries long course in the forest. The werewolves are just starting to go on the offensive now because they've gotten tired of waiting on him to cure it. We can now choose to help end the curse, take revenge on Zathrian and the tribe, or exterminate the werewolves. Note that you have to be fairly good at persuasion to convince the Lady of the Forest to lead an assault.
For the approval effects, Wynne likes it if you end the curse and Morrigan should like it if you kill the elves. Leliana will be quite upset if you try to kill the werewolves. Wynne will be upset if you try to kill the elves or the werewolves, although you can use persuasion to reduce the effects greatly. Sten holds no real opinion. It basically extends pretty naturally from there.
As for the material differences, the big difference is who you get for the final battle. If you kill the elves then the werewolves will join up with you. I don't know why you would want more melee fighters, but you can have them. If you kill the werewolves or end the curse, then you'll get some Dalish archers for the final battle.
You can loot a fair bit of stuff from Zathrian, although you can actually kill him in all three paths. If you kill the elves, then you can loot everyone in camp. The reverse is also true for killing the werewolves. If you cure the curse, you can get a shield from Swiftrunner.
*As an important note, if you're collecting the Scrolls of Banastor then you need to go back up to where the gatekeepers stopped you. There's a scroll in one of the side rooms. It's not fun to backtrack this far, so grab it when you can.
Now for the details.