What is the effect of the priest's stand on Tenorio and the townspeople?
I'm assuming you mean in Chapter 13, where the Priest at El Puerto tells Tenorio that one of his daughters who has died cannot be given a Christian burial and a funeral mass. The Priest believed, as did many in the town, that Tenorio's daughters were evil, even brujas, witches, themselves, and he did not want to bring such a woman into his church for Holy Mass.
Of course Tenorio is infuriated, but rather than take it out on the Priest, he decides to take revenge on Ultima, who's curse he believes killed two of his daughters. The only effect of the priest's actions on the townspeople that I can think of would be that his refusal to bury Tenorio's daughter in the Catholic tradition left Tenorio with less support from the overwhelmingly Catholic population of the town, and less support for going after Ultima.