I was thinking about the Woodsman's behaviour during this episode and previously, and in my opinion it seems like Grendel has gotten the wrong end of the stick regarding Woody and Lily. I think that Woody genuinely cared for Lily, and before she died they were, effectively, in a relationship. A sad relationship between two broken people, one of whom was paying the other, but a relationship nonetheless.
Note that this is all speculation:
When Grendel mentions the events of Lily's funeral, Woody agrees with him as if he were there. I think that suggests that he was there secretly.
Also, at Lily's funeral, if you look at the offering table you can see three cards (one from Holly, one from Gren and one from Vivian), but there's also a bottle of Whiskey with no note. To me, that seems like the kind of thing that Woody would leave as a secret offering.
If you interrogate Woody in Episode 2, he divulges that Lily was his regular prostitute, she used to front him on the monetary side of things, and was generally lenient towards him. This suggests she thought of him as more than just any other john. They were at least on friendly terms. Also, the reason why the Woodsman started beating on Faith while drunk was that she turned up unexpectedly when he was waiting for Lily. In his drunken state his disappointment turned to rage.
I suspect that the fact that Bigby has the option to tell Grendel that what happened was between Lily and Woody alone suggests that this will be touched upon later. I think that in the next episode we'll find out that Woody was more shook up by Lily's death than anyone.
Anyone agree this was more than Woody just being a sleazy loser paying his friend's sister for sex behind her back?