The flute you found was carved from an ancient protector, the treant allies that have faithfully protected the night elves.
The satyrs have been able to corrupt anything they come in contact with, which includes the ancients that made Felwood their home. By the use of the fel, the spirit of the ancient has been bound and tortured, never completely released. The felbind you found is no doubt related.
We must try to purify the flute, <name>. Bring me blessed water from the Temple of the Moon in Darnassus.