What does your party consist of? I had 5 PC party members at around level 2 or 3 before attacking the moathouse (Paladin, Cleric, Monk, Rogue, Sorceress). I spent some time "resting" in Emridy meadows first. You can probably do the same in the woods where you cleared the spiders, or on any "random encounter" map. I got attacked quite often by undead during those naps (and Turning with a Cleric of sufficiently high level to destroy those undead can make for some quick experience). I would do that a couple of times and then go back to town and rest to recover. If you repeat that a few times, it may give you the XP boost you need to be more comfortable with the fighting.
On the other hand, a good fight should take a lot out of you. It means you're earning good experience. During random encounters, like those outside, the game should give you a challenge, but nothing unbeatable. However the battles in the moathouse are a set difficulty, so you want to be prepared.
I hope that helps.
"I'm not closed minded; you're just wrong."
Bucky B. Kat