Both constructions are possible. For example: The first thing they did was go to the little village church and pray to the Lord. or The first thing they did was go to the village's little church and pray to the Lord. The first example is the more usual form. In this sentence, you have a compound noun 'village church', composed of two nouns put together : 'village' and 'church' . This is quite a common construction - similar to village shop, or village school. You need to put the adjective (little) before the compound noun ie 'little village church' - you can't separate the two halves of a compound noun. The second example uses the construction you refer to as the Saxon genitive. It is possible, but fairly unusual, to use this form with a noun such as 'village'. As you know, the 's' ending usually goes with proper nouns and names. There's not a lot of difference between 'little' and 'small' in meaning, but 'little' collocates better with other adjectives eg a nice little restaurant. I hope that answers your question.

Hi Andrew, I have no idea what a saxon genitive is, haha. But I can give you suggestions on how to write this. First thing they did, they went to the small/little village church and prayed TO the Lord. [This word ordering is more commonly heard and indicates that the church is an integral part of the village; i.e., it belongs to the village. There is not too much difference between "small" and "little," although the word "little" carries a slightly cuter connotation - in a charming way.] First thing they did, they went to the small/little church IN THE village and prayed TO the Lord. [This word ordering simply indicates that there is a church that happens to be located in the village.] "First thing they did" as a standalone phrase is a bit informal. If this text is to be written in a casual context, or indicating a person's speech, it's ok. Otherwise, you may choose a more formal phrase like, "Immediately upon arrival, they visited the . . ."