Choosing the option "Do what you think is right" will cause Vienne to call for help. The conversation ends, and Geralt enters combat with Vienne and three other elfs. On the other hand, choosing "Don't kill her" will cause Vienne to insult Geralt, but no fight breaks out.

Did Karadin really change?

All evidences seems to point out Jad Karadin has changed. However, his remorse seems fishy and fake, and yet there is no way to prove it. Conversation with Lambert pointing out he trades in "live goods", hinting slaves trade. He knew someone was hunting him down so he sent a fake letter to Hammond to keep it.

What happens if you don't help Lambert?

Ultimately, it is up to you whether you choose to spare Karadin or help Lambert kill him. There are no real consequences to the quest as Lambert will still consider you a friend, regardless of the choice.