I didn’t really hesitate with this choice, mainly because it doesn’t have major consequences in the game, such as significantly affecting the story or the player. It mostly influences Atlas’s relationships with some side girls or potentially with his main LIs, but nothing too impactful for now. I assume it also determines which allies show up later, just before the predictable final battle.
Choosing Bael and the demons feels like the obvious choice. There's a strong friendship between Lucius and Ba'el, proven loyalty, and solid ties between Atlas and the two demon girls.
The first option just feels natural and logical, so there’s no real reason to overthink it. I almost expect the second option to lead to something negative later, like a betrayal, but maybe not. It seems to depend more on which side relationships the player wants to explore and which allies they prefer for the final fight. For me, it’s more of a flavor choice than anything else.
So far, only Ba'el and especially Kagome have a bit more character development, so picking anything else wouldn’t make much sense. Honestly, I would’ve regretted missing out on Kagome. She’s fun and sexy, and missing her would’ve been a big loss. She’s definitely my main other reason for choosing this path.
After making this choice, there’s some tension with Leyala, but it feels more like a minor disagreement than a full-blown dispute between them. It’s brief and doesn’t seem to matter much in the end. It mostly shows Leyala’s inexperience in politics and comes across like a small couple’s quarrel. **
I doubt players would choose to side with the witches, except maybe as an alternative save to see missed content. We know so little about them, and Arianne has already shown duplicity by manipulating Ba'el for power. She’s clearly responsible for provoking his anger and causing the conflict, as far as we know.
As for potential losses for the witches or demons, that seems inevitable, regardless of the side chosen. The confrontation is brief, and the conflict is resolved, at least for now. Plus, given Atlas’s age and vampire nature, I don’t expect him to be overly sentimental when making decisions. He’s a prince, after all, whose main goal is to strengthen his position and Lucius’s, ensuring his future as the ruler of a united kingdom.
** That said, I’ve always stayed loyal to Lucius in my main playthrough with Atlas, mainly because betraying him doesn’t have any significant effects for now, except maybe temporarily straining their relationship. Though, honestly, Lucius can seem a bit like a burden at first, and Atlas could have overthrown him. He might have even done so a long time ago, given Ophelia’s wrongdoings at court and Lucius’s prolonged failures as a leader.
But anyway, that’s not really important. It’s a shame we can’t join Ophelia either, but then we’d no longer have our main antagonist, and it’s tricky to integrate too many branching paths with consequences that affect the overall storyline.