That still makes it useless in every encounter except Nere and the Gnolls by your account. Except, AC doesn't seem to work for you there, either?
I admit, I keep at least two optimized characters in every party and utilize items. In the Gnoll fight, for example, because I don't want to arrive at the second pack weakened.
As for Nere, most people either team up with the two duergar or kill the duergar before freeing Nere. I assume your problem is that you roleplay with no foreknowledge, don't use items. I'm pretty much the "kill first and speak with dead" later variety. So, I only rescue a drow I'm specifically here to kill because I want the loot. The minions die.
I'm definitely also getting a surprise attack during dialogue in, because why even talk if it's not a trap? I'm evil. I have a horrible reputation to upkeep! Not necessarily my chars, but their doom remains that I'm the player.
I use items. Doesn't help. First round I used the tunder arrow to knock Nere into lava a couple of times. he just jumps out and then frightens Shadowheart. Apparently the game doesn't let you cast spells while frightened even though it doesn't say that. Then there are so many enemies that they will evidentially crit my 21 AC paladin to death just through sheer number of attacks.