So here is my theory. The effigies we are lighting through our dances are actually evil. I think that they are constructs of the flame legion used for some evil purpose tied to an elder dragon. I popped into GW1 and went to the Great North Wall around the Last Days Dawn quest area and found these burning effigies which bear a similar shape and form to the ones we are lighting.

So we know there is a steam-punk-type parallel universe from the Asura Personal Story and that these creatures are coming through a rift in Lornar's Pass. In that zone, we fight many of the steam creatures who have found their way through. So here is where my theory comes into play:
The Charr representative which got hurt is actually a flame legion shaman who created the effigies as a conduit to try and gain the same powers that the flame legion had when they were aligned with the titans (who I believe were constructs of Primordius?) and he tricked us into lighting the effigies to help spread the flame legion powers throughout Tyria. The Steam-punk-ish group the Aetherblade are actually the Steam-punk universe's PACT who have come through to stop us from lighting all the effigies because the flame legion shaman who was "hurt" was actually a very dangerous criminal from their universe who slipped through.
This Aetherblade group has fallen into the seedy underworld in our Tyria because they found a seemingly innocent Lady Kashmeer who in reality is part of a dark underbelly group in Divinity's Reach, but appears to be an innocent noble. Instead, they are being played by her to do her deeds.