The crypt on Arnika-Tryton road.

I can only use hoky water in combat mode. When I do so all my PC say I'm mad and stop the action. I can't drop a bottle of water on the corpse! Any clue?

The way it worked for me was to get close enough to see a hand cursor on the corpse, then pick up the potion of Holy Water and click it on the corpse. The priest spell does not work here probably since it's only available in combat. Good luck!