Well, as I said I just reached level 4, and if you reached level 5 in the fight, you've been fighting many more battles than I have. I have 1 blue (Level 3) and 2 greens (levels 1 and 2). That's in total across all my characters. (Sebille does have a level 3 green bow, but I've switched her to the Houndmasters Crossbow for now.)
Your Rogue has a lot better equipment than Ifan, most notably the Flenserville daggers, from a fight I haven't tried yet. Your dual-wand guy has Gwayn's robe, and I haven't finished that quest yet (I want to buy some of his spellbooks first).
All of your characters have substantially more armor than I do except for my Red Prince, and you have a lot more magic equipment. There are only two pieces of gear for sale in the store, so yeah, there's a reason why you found the fight easy and I didn't.
I guess I'll just stock up on skills and hope that will let me acquire better gear from combat.
I did kill the houndmaster, but bypassed the dogs with a non-combat solution, Cork and the Court are still alive, as are the four guards outside the prison gate to the fort. The two magisters at the beach are dead, as are the two at the wilderness side gate and patrolman Kraus and his dog, so I can now roam the camp freely without a collar as long as I stay away from the fort gate.
They are seriously hard at that level. Could be I'm rubbish at fights but I almost always lose if there are more than 2 of them unless I'm at least one level higher.
You can ignore them and come back later (that is one option and what I do as otherwise I just die). If you complete everything in the fort (and kill all the magisters) before leaving you will be on level 5 (or 6 if you fight Dallis).
Alternatively you can avoid them and go south and pick up some more XP (and decent free gear) on the other side of the Island.
If you must fight them then netherswapping your mage or archer with the Pyromancer on the tower helps.
I'd suggest stealing not buying the €245 skill books if it fits with your approach. I figure if you are planning to kill someone for their crimes you may as well rob them first. I can see this may be a morally dubious idea though and there are some (OK only 3) NPCs I can't bring myself to kill.
The skeleton just north of Lucian shrine sells decent armours as you know. There are also 3 places with rare level 5 stuff on the beaches just a bit further to the north of him/her (one of which will be on your map if you have been a good elf and eating things up) and there are various other places dotted around with high level gear to pick up.
What are you talking about fighting Dallis? Do you mean using the ladder to bypass the cutscene where she kills the magister, then coming back later when you're higher level? It's odd that that's even allowed, and it probably shouldn't be. In any case, I've long since passed the point where I can interfere there and I'm not restarting.
Stealing actually doesn't sound like a bad idea. I'm level 4 now, I can take Thievery. I can only lift one skillbook per person, though, so I'll have to choose carefully. I don't have to kill them if I eat the evidence. That'll let me be able to afford a piece of gear or two.
I sent someone to scout the outside-camp merchant to see what they have, and it wasn't really especially thrilling, especially for a thievery limit of 0.5 weight units.
Were you playing on explorer? There are 5 not 3.
Unless I'm thinking of the wrong group of course. South/East of the Lucian Shrine.
There are three in the group south / east of the shrine on Classic. It's the group which has a little conversation before the fighting.
