I did most of the quests in Rivertown and Verdistis and cleared the Rivertown sewers before entering the castle, and had no problems in Iona's dungeon. As above, some people recommend doing some or most of the Dark Forest.
With the fight at the Dwarven Bread inn, you can 'cheat' if you like. Drop armour, weapons and/or potions on the ground before talking to the manager, then pick them up on your way to the ring; the poison skin spell is also effective.
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