Why am I repeatedly dying in Castle Darkmoor when I'm alone and not moving at 3:00am. Is this a bug? Is there some lore that says 3:00am is the witching hour and causes 2-3 of my characters to die?

Are your characters insane? They can die from that if left too long without healing.

Yes they were. That was probably it.

Interesting. And 3AM is when they go weak from no sleep. Maybe the two together.

Insanity itself isn't the problem. As far as I'm aware, your characters can be Insane indefinitely with no effects other than the stat changes from the condition.

Going without sleeping for a number of game days is probably the problem; after several days of no sleep, your characters are subject to Insanity or possibly Death (in addition to the usual Weakness that hits). An area transition counts for sleeping, whether by stables, boat, or walking, since the game assumes your characters sleep during that period.

By the time you get to Castle Darkmoor, you probably have Town Portal and Lloyd's Beacon. I don't know about you, but I use them frequently to just keep on adventuring, healing the weakness from no sleep whenever it crops up. I periodically get hit with Insanity and Death because I failed to stop and sleep for too long. :)

You don't have to be in Castle Darkmoor itself for days. If you've spent the last three days adventuring in Silver Cove, then Myst, then raiding some dungeon in New Sorpigal, and you might hit the sleepless limit as you then try to clear Castle Darkmoor.

When I talk about area transitions, I mean walking against the edge of the map and getting the choice to spend 5 days (or whatever, depending on your NPCs) to travel to an adjacent area (ex. New Sorpigal to Castle Ironfist).

You can use Cure Weakness each 24 hour cycles whenever it occurs, but the "time spent with no sleep" timer keeps ticking up.

Typically I rest or heal when I get beat down so it usually takes me multiple in game days to clear a dungeon. Darkmoor is unique in that it has taken me multiple real life days. I'm probably a little underpowered but at this point I'm too stubborn to move on.

Healing magic doesn't do anything to the sleep timer, and using any of the Rest menu items under "Rest without healing" (to use equipment that gives you regeneration, for example) just advances the time spent sleepless. You have to actually select "Rest and Heal for 8 hours" and pay the food cost.

If you've been sleeping regularly (and thus not encountering the periodic Weakness for going 24 hours without sleep), then I don't know why you are spontaneously dying. If it happens in the same area each time, maybe it is some trap? I don't recall any instant death traps in Castle Darkmoor, but I haven't played in years.

Who knows? Maybe rmeakins is right and I'm wrong about Insanity eventually causing death if not cured. I like to have my Knights go insane since it boosts their combat stats without hurting any stats they actually use, but I don't recall my record for time a character has spent Insane.