I'm at chapter 4 I have 2 fighters, 1 paladin(With plate armor, magic weapons, and large shields.), a rouge, a druid, and a mage all at level 5, but I'm still having a hard time. what am I doing wrong?
BG:EE

Hard time? Explain more :) Well, general advices are: Use <Pause> and <Autopause> a lot. You can set up <Autopause> in option menu. Then, check your spell selection. Maybe drop useless spells and memorize some more useful. Use your rogue all the time! Search for drap, hide in shadows, scout areas...
There are lot of useful tactics for special occasions, but we cant tell if we dont know what is the hard time for you. Again, <Pause> then plan your next steps in battle.

Oh, almost forgot: Use potions. I know, i know, maybe they will be handy in next fight. But, you wont reach next fight, if you dont use them now. So down the hatch with that Potion of Hill Giant Strength ;)

Well I'm having trouble keeping my party at full health in tough fights because healing spells and potions don't give me enough hp anymore, and mages keeps causing my entire party to panic even though I attack them first causing my party to die.

Against panic, use the special ability of your paladin - resist fear. Or have your mage memorized one of these spells. Not enough health? Summon mobs to take the beating, and use ranged weapons from behind. Or, if you like to go toe-to-toe, improve your armor class. Buy the best armor your can get for your fighters, try to get the AC below zero at least. The lower, the better.
Check the difficulty in your settings. Maybe the slider is too far to the right for you? But dont put it to Story Mode, else you will lose interest in the game very soon.

Almost forgot again something: If you are fighting mages, remember, they have same restrictions as your mage: only a few spells are available. So, let them deplete their power on lesser summons, while you sit back and later go in with a smirk on your face, quoting a famous dark elf: "How many spells remain, wizard?"

Eliminate mages as soon a possible. In BG1 this is quite easy. Typically an enemy mage will cast mirror image and will be surrounded by other enemies. So the best way is to eliminate mages from afar.

1. Cast magic missiles with your mage targeting the enemy mage. This is the best spell to eliminate mirror image in BG1
2. Give long/composite bows to 2 or more characters.

This should eliminate the enemy mage very quickly.

Remember also that you can prepare your party before battles. If you know that a battle awaits, prepare your party. Drink potions, cast protective spells, use arrows +1/+2 etc.

Actually, this isn't always true; there are some cases where the game actually cheats. I don't know about BG1, but I do know that in BG2 low level enemy mages get free Vocalize and high level enemy mages get True Sight. Note that these free spells that enemies sometimes use can't be interrupted.

Technical explanation: These spells are cast by the enemy using the ForceSpell() action, which does not check to see if the enemy caster actually has the spell memorized. A fair AI would only use CastSpell() which does check to see if the spell is memorized and is interruptable. There's also ReallyForceSpell(), which omits the casting time and the one-spell-per-round check; in BG2 it's used, for example, to simulate enemy sequencers and contingencies (which they can't use because the engine doesn't allow it).

Well, havent noticed that in BG:EE yet. So far, all seems... legit. Not much of an expert in deciphering game-mechanics though.

Ok then where's a good place to get summon spells and how do I get resist fear for my paladin?

Remove fear is a priest (cleric/druid) level 1 spell. Your casters will get summoning spells at level 7.

Advice for now: If an area is too difficult clear an easier one first, those cloakwood areas are pretty hard compared to most other areas you have access to now (avoid Durlag's Tower and Ulgoth's Beard until you've reached chapter 6).

If you are in an outdoor area, you could try using Charm Animal with your Druid to recruit some help. It won't work everywhere, but a couple of bears can give you that summon buffer, if you can find them and they fail their save.

Not only in Icewind Dale. It is in Baldur's Gate 1 & 2 also, at the same level. You can also get the scroll/s from Thalantyr at High Hedge.

Dang, you are correct: http://mikesrpgcenter.com/bgate/magescrolls.html