Is it wrong not to cite a bad quality paper when the literature on the topic is scarce?
To which extent citing means endorsement if no furher evaluation of the cited paper is included?


None at all.

By citing the paper as using the software, you are acknowledging that the paper exists, and that it used the software, and that is the only thing you are doing. Citation is not a sign of approval or agreement or endorsement; it is merely acknowledgement of existence and relevance.  Citations are not statements about the quality of any result, either positive or negative.  If you want to state an opinion about the quality of a result, either positive or negative, you must actually state your opinion in the text, using English words.

I suggest initially citing both papers, and then giving more details about how paper A used the software to derive interesting results, and then remaining conspicuously silent about paper B.