There is a gap where you're lower than the monsters you can fight (2-3?), but if you run around and do some quests around town, you'll level up where you can fight the mobs outside of town. There's also a cave in the graveyard with level 2 monsters you can fight. Otherwise, there should be mobs that fit your level so you can progress

I do agree I'd like a better way to see environment affects but monsters usually make sense in what damage they do. The only fighter that does fire damage that I can recall is in the fire area?
When you bring up the menu to save/load, there's an Assign Characters (host only) so you can give your friend's characters back
