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When you first enter the church, you'll witness several ghosts appear and attack a pair of priests. One priest will get killed, but the other will make it to the confessional (#1).
1 - Confessional
The confessional is actually an exit to the lower part of the church, where you'll find a priest and the church's secret library. The priest, Father Theofolus, won't have any idea why the ghosts have been attacking, and he'll only be able to conjecture that there must be some sort of desecration going on. If you ask about the priest who died, Theofolus will mention a boy named Vinny, who the church took in, but who hasn't been behaving very well.
When you exit the secret library, you'll see Vinny urinating into the "mass wine chest" (#2), and you'll discover why the ghosts are so upset. When you relay this information to Theofolus, he'll rush upstairs and kick Vinny out of the church. Then when you talk to Theofolus again, you'll earn 30,000 experience and 1000 gold, and Theofolus will start acting as a potion merchant.
Note: Vinny will now appear in the Poor Quarter, but nothing much will happen if you talk to him.
If you've spoken to Gareth at the barracks, then you'll be able to buy a "feign death" potion for him from Theofolus. Although Theofolus says it'll cost you 2500 gold, the transaction is bugged, and it won't really cost you anything.
2 - Mass Wine Chest