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Tatherwood: MC didn't kill the villagers and town people because he didn't want Heinz and especially Gordan to come after him immediately.
Remember, they think MC is dead because he is just a baby who a few months old. If the people (especially the lord) in the town died suddenly, then it would especially alert Gordan who is a Church fanatic, because who else the MC would want to take revenge on the whole town. And MC didn't want that, as his current goal is to find a way to physically resurrect his mother.
Now, because of this odd revenge by MC, not only the whole town has to suffer because they would have to either rebuild their land from scratch, or leave that place and shift to other area, which would again be difficult for them (as they would be treated rough as refugees). This would cause the people to be confused and not immediately figure out MC as the culprit. Even if by some chance Gordan is able to figure it out, no one would believe him to support him in his hunt for MC without proof.
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aixt: But MC couldn't and considering the situation, i would say that it was tactically the right decision by MC as well. Killing those villagers and lord would only make MC the target of Church Fanatics like Gordan, and considering MC isn't even 1 year old, it would be hard for him to fight off someone like him.