Hoopy Frood

You can report back to the Bardatto lady after overhearing the conversation in the Hole, and she'll reward you for that part of the quest. Then she wants you to go down into the vault and ambush the thieves when they show up; this is where I usually choose to go and negotiate a peace between them instead. I don't know for sure that proceeding with the vault burglary will lock out the peaceful negotiations-option, but I haven't taken the chance so far. I can confirm that you can finish the sidequests for all the rewards and still bring peace to the families. (I'm guessing the vault ambush, since it's part of the main quest, will permanently destroy any chance for peace, but I didn't try.) After you report to Bardatto about the conversation, as part of that conversation tree you can mention pursuing peace but she'll say something along the lines of "it's too late for that and come back when you've decided not be a feckless idiot." This is even further indicated by the fact that even with you saying this, the Family Pride quest journal has an entry mentioning that you agreed to support the ambush in the vault. But if you've already convinced Valera to consider peace, just talk with the Bardatto woman again, and the option is there to set up the meeting. Also, for something that seems to be a major issue with the VTC, to the point that Pallegina will go to you (assuming she's in your party) and mention that the peaceful resolution is best, Pallegina had nothing to say when I accomplished the peaceful resolution. I didn't seem to get any repuation bump with her (though, I did get a major repuation bump with the VTC). She didn't even have anything new to say in conversation. I'm not even using her in my party all that much because she overlaps too much with the makeup of the party. (Mostly my Kind Wayfarer Inquisitor). (Yeah, I know, if I really want to cheeseball the Paladin/Cipher combo combatwise I should go with Bleak Walker, but that means no Diplomacy or Benevolence (if I don't want to start taking defensive penalties), and actively being cruel and aggressive (if I want to get the defense bonuses). And what's the point of playing a Paladin if you're not going to go for the benefits of the extra defense you get for sticking with your desired outlooks. Diplomacy doesn't help Kind Wayfarer's, but it doesn't hurt them either. And Passion and Benevolence are easy enough to accomplish.)

I can confirm that this is still an issue. Hylea doesn't like me. And since I'm playing this (via Steam) on a separate computer from the one I played PoE 1 on (also via Steam), rather than install PoE 1 to get my cloud saves, I just manually went through creating the history. And I chose Hylea. And boosted the Dyrwood. Just as I did in the game. So I can confirm that this happens when manually creating history. If you fixed the bug with save import, you haven't fixed it with manual creation. I should also add (in case it matters) that this was actually the second time I manually created a history. I decided to restart with a new character build early on in the game (i.e. sometime in Neketaka) and since I had encountered the issue with Hylea the first time, I recreated the history in case I somehow messed it up the first time, or possibly the choosing of two gods with the same end goal was an intentional in-game issue with the gods themselves. In PoE 1 when I played it (and when I manually created the first history for PoE2) I actually supported both Galawain and Hylea, since both wanted the same end goal of reinforcing the Dyrwood, even if they did it for different reasons. Neither had any issues with this in the first game, IIRC, because they both got what they wanted. But after Hylea's reaction in the first dream sequence after the boat, I thought maybe she was the jealous type or something, so for my second history creation I chose just her. But this still resulted in the same thing as the first history where I choose her and Galawain: no boon and a ship that's literally full of crap. Also, if you're supposed to get a boon from Galawin if you choose him, I'm pretty sure I didn't get that either with the first history I created.

I can confirm that this is still an issue. Hylea doesn't like me. And since I'm playing this (via Steam) on a separate computer from the one I played PoE 1 on (also via Steam), rather than install PoE 1 to get my cloud saves, I just manually went through creating the history. And I chose Hylea. And boosted the Dyrwood. Just as I did in the game. So I can confirm that this happens when manually creating history. If you fixed the bug with save import, you haven't fixed it with manual creation.