tl;dr:
Reading the diary does not provide a path to the "fairytale" ending when visiting the Elder's Cave.
Also, despite the Beyond Hill and Dale quest still open for a long time, you cannot take the fairytale book anymore at some point (probably at the last decision dialogue with Regis at the docks).
Here's the longer version of my observations.
- I told Regis that I'd go with him. Talked with Damien. Went with Regis to the playroom, and explored it. Did not take the key from behind the painting or even touch the cabinet. Read the diary.
=> Beyond Hill and Dale started, but The Night of Long Fangs was still active with
- Ask Orianna where to find the Unseen Elder
- Find the book "The Land of a Thousand Fables."
- feeling like a jerk, I now ran off to chat with Orianna. Blood Simple ran its course up until "Talk with the Birds". Beyond Hill and Dale didn't change its status.
As this is about testing if reading the diary is enough to get the fairytale ending (I refuse to call it the "good" ending), I'm now going to summon Regis and visit the Elder.
This dialogue with Regis seemed somewhat different to when I had opted for Orianna straight at the start of Night of Long Fangs. But it's subtile.
I really dislike acting like this, when Regis is so clear about that we shouldn't do this. This is hard. Still going for the cave.
Oh, interesting. What Lies Unseen just started - but Beyond Hill and Dale is also still active and dormant. So, maybe I still could change my mind (needs more testing, but would make sense, as Regis isn't really needed for the final steps of Beyond Hill and Dale.)
The quests remained in this state until I entered the main cave of the Elder.
It's possible to get the gloves of that red armor before committing to this path.
Bitten by the Elder. Still got Beyond Hill and Dale (but now no way back there...)
So, right. Beyond Hill and Dale remained there until I was back out of the cave, but then there was a forced teleport to Tesha Mudna; killed Detlaff; got the 5th letter; went to see Syanna...
... and knowing stuff from the diary did not change anything.
In fact, IIRC the conversation there is like the dialogue between Syanna and Geralt in Wonderland after they collected the first bean (or even after the Wicked Witch died). Syanna needed a lot of work to be molded into fairytale ending, it appears.
Makes me wonder how I actually managed to hit that ending in the first playthrough, with so many roads leading to "everyone dies".
I'm now going to try and see if I really can still make up my mind after having opened the Elder's Cave.
Well... playhouse is still open, key can still be taken, but the fairytale book remains in the cabinet. No way to interact with it.
Awwww.
But, maybe you can get the gloves after having been in Wonderland. I would suppose the Elder might just kill you when you enter his private cave, not the tunnel entrance section.