A forest in the northeast where something has gone wrong with the natural order of death. Spirits linger here: not undead (those are shadow-bound corpses), but actual spirits, the consciousness and identity that should have faded to Celestia. They didn't. They stayed.
The spirits of Spiritwood are not friendly. They remember their deaths, their murderers, their betrayals. Some were killed by Xynoth's forces. Others died in the chaos before the empire consolidated. A few are older still, remnants of whatever people lived here before. They hate the living for still being alive and hate the undead for being a mockery of what they've become.
Even Xynoth's forces avoid Spiritwood. The spirits cannot be commanded, since they have no shadows to bind, and they're vicious to anything that enters. The forest has become a de facto no-man's-land, dangerous to both sides of any conflict.