Thanks for all the replies.
I agree with much here, but first, a little more background.
I have four players, all on the neutral to good spectrum. Three of them are perfectly sane, nice, adventurers, out in the world, trying to do the right thing and make it a better place.
And then there's Edran. Edran is a half-elf rogue who is just about as off the wall as a person can get. He's immature, impulsive, chaotic, given to kleptomania, maybe slightly insane, and an all around pain in the behind to everybody around him. This is NOT to say that he's a problem character, although it probably sounds like that. All of the traits I've described are by design by the player, and I know he's got an overarching idea in mind for a gradual shift in maturity for Edran that we are just now (they just hit 11th level) starting to see. But even so, he is sometimes a bit of a trial. He's funny and wacky and generally very good at his jobs when he actually decides to do them, but he's got our cleric to the point of pulling his hair out. Edran has actually died three or four ties now. In fact, he's actually his own clone at this point (long story), and one of those deaths was laid on him by the party's benefactor, a very powerful wizardess who repeatedly warned him about pilfering from her until she finally just Power Word Killed him after he attempted to steal from her for the umpteenth time, leaving our cleric to Revivify him.
The point is, Edran keeps being brought back from the dead, and even in other situations that go sideways he manages to come out smelling like a rose. His battle cry is, I kid you not, "No consequences!"
Now then, one of Edran's more endearing traits is his inability to hold onto a gold piece for more than about five seconds, and usually what he does is give it away to the nearest begger. Which is fine. And in the case of the little village it was Edran who first handed over his share of the giant's loot. The other players, not wanting to be outdone, followed suit and handed over theirs as well.
So the point is, part of the motivation behind the destruction of this village is to show Edran that there are indeed consequences. And yes, I know there are plenty of other ways to do that, and they are being done. As a matter of fact, Edran is currently cut off from all resurrection magic from Clangeden until he does a *ahem* service for that god, which might get tricky since our cleric is a priest of Clangeden.
So, while yes, I've thought about the fact that the party might see the fate of the village as a reason to not do any more good deeds, I'm pretty sure the blame will rest squarely on Edran at the end of the day.
Plus, I am not a "DM as devil" sort. They've had a pretty good career so far of doing the right thing and not having the results be twisted. This will, in fact, be a first. Still, it's a valid concern, which is why I may temper the result to reflect some of the more middle-of-the-road ideas posted here.
On the other hand, sometimes things do not go as planned. I trust my players enough not to worry that they'll just never do another good deed based on one instance.
In retrospect, I agree that 1200gp is probably not enough gold to send a village of 70 into a murder spiral. Still, I'll give you my quick take on it.
I figure, 70 villagers, so a quick and simple breakdown might give me 25 adult men, 25 adult women, and 20 children and/or seniors. This being a typical medevil chauvinistic village, the women don't get a vote, so it comes down to a 25 way split. Or I could break it down into family units of, say, 10 to 15, which is a number that gives the 1200gp a little more weight. Still though, even if you split it ten ways that's only 120gp per family, and I agree that that's probably not enough to spell doom.
Or maybe it is.
Here's the thing: Given human nature, I imagine that kind of money causing some upset in the community. The elder has it all at this point, and maybe he wants to use it to buy that new windmill, but lots of the villagers want their own cut. So maybe the elder agrees with the public pressure and decides to divvy it out. But now the blacksmith demands a larger share since he's a skilled craftsman and thinks he's worth more than his farmer neighbor. And at least one family has lost a son to the giants, so they think they're entitled to a bit more. Same with the folk who lost livestock, although now they're arguing over what's worth more, a son or a cow? And then there's the elder's own family. Maybe his wife is whispering in his ear that's he's the bloody village elder around here and as such should get the lion's share. And then there's his drunken brother or layabout son, either of which might try to steal it all for themselves.
I guess what I'm saying is, greed is a bi*ch, and it only takes a few pints of ale and a discontented loudmouth to get folk riled to the point they do something stupid.
And by the way, the population of 70 is a number pulled out of a hat. I could adjust that downward to make the amount of gold more desirable.
Anyway, I'll think on it some more. I might temper it so that perhaps only one townsfolk gives into his greed and steals the gold, thereby shifting the anger from the PC's onto that villager. I also know that there's a local bandit gang, and if they should get wind of the cash they might visit hell upon the town. That would also shift the blame from the party, but it might make them a little more cautious about disrupting local economies willy nilly in the future.
Part of the lure of this scenario is to show real consequences of the PC's actions. In most cases the players do what they do and never give it a second thought. I think it would be interesting if they came back into this town, which they have now completely forgotten about, and see concrete evidence of their past actions.
Oh, and someone asked how long it's been since this all went down. It's been just about two months since the group passed though the village, and it might be another couple of weeks before they come back though it again.