Yuri_G
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This is a secondary quest – it’s not necessary to complete it. I won’t argue, as I didn’t complete it myself. Perhaps you’re right that completing it would result in the elves having a weak army. I probably wouldn’t be able to defeat the main enemy with just one Agrael. I played through it twice – both times, a hero – a druid hired in the tavern – weakened him significantly. In the second playthrough, he managed to level up on neutral creatures to almost level 10 and had a full set of units.
The elves will have not a weak army, but a smaller one. If I’m not mistaken, it says that the magic source increases the elf’s growth rate, so destroying it contributes to reducing their army.