What do I do with all of these papers and notes

After some more researching, I found an interesting post on GameFAQs, namely:

I spent a while on this. I searched everything and even fought it once. I had to reread my bestiary to trigger the body burning interaction.

And sure enough, after reading the bestiary entry for the Devil by the Well (again), a cutscene was triggered and now I can burn the skeleton instead of just examining it.

TL;DR

Read the bestiary after reading the diary, finding the bracelet, and pulling out the skeleton.

If you choose potions you get Superior Swallow, and depending on finishing the side quest "Following the thread" a Fortified Raffard's Decoction.

The traps will kill some enemies in the battle.

Repairing the wall will mean one less wave of enemies attacking.

The forge will result in getting a silver sword.

The general theme is deciding between getting an item or recipe, and directly affecting the battle in some way. Getting the sword and potions might not be a good idea if you're already well equipped.

_{This information is based on various online guides, they are mostly in agreement but there is also some contradictory information.}