In a skillet over medium, saute the onion in butter for 4-5 minutes. Add the mushrooms and garlic and cook for 5 minutes. Add sherry, salt and pepper and cook for 10 minutes. Set aside and let cool slightly.
Preheat oven to 350 degrees.
Combine cream cheese, eggs, spinach, walnuts, and tarragon, then add in cooled mushroom mixture.
Place mixture in a buttered loaf pan. Cover with aluminum foil. Place loaf pan in larger and deeper pan partially filled with water. Bake for 1 hour 15 minutes.
After baking, remove from oven and chill inverted on a plate. Once chilled, the pate may be sliced and served.