What? Not to mention the fact that the Royal Slug has (relatively) high magic armor (99) and physical armor (~67?) along with a plethora of status immunities. To be fair, I am probably bad at the game, I am playing it on tactician difficulty (+50% to some stats), and it is my first time playing, but I have no idea how a level three to four party with four members is supposed to be able to fight them even with strategy and all. Being surrounded is a death sentence, and it's relatively easy to get surrounded as one may be chased down by enemies one would presume (teleporting crocodiles, leaping frogs and dashing turtles) to be slow. So that means kiting is apparently out of the picture.

Don't get me wrong, game is great, just struggling with combat (can't beat the arena and houndmaster either). Maybe I just need to get good.

/rant

Team comp is currently: Fane as Wizard, Lohse as Enchanter, Beast as Battlemage and Red Prince as fighter.
Positioning is probably off as I initiate combat from behing the Royal Slug, and not from the pool of water at the bottom of the path leading up to it (no Wet status to fend of constant burning).

P.S. I know one does not necessarily need to fight due to dialogue options, but I read one gets more XP and better items through actually defeating them.

I don't think you are supposed to fight them. My understading is that on Tactician some fights are better be avoided by means of sneaking/persuasion. There is a skill that allows to talk to animals, you can use it to talk to queen. One of companions have it. And you can also sneak around them as well I think.

Yeah, Pet Talk skill. I took it on Lohse to I could have fun reading animal dialogue, and I already used it on the Queen, but decided to reload save to see if I could beat the instance for better items/exp. I would think it was just a design choice and not me playing poorly if it wasn't for the fact that I cannot beat the first (only?) fight in the arena or the hound master in the cells as well. The enemy levels are the around same as mine (level three party), so I presume that one should be able to defeat them, which means my team/item comp is off. I focused on building the Fighter as tank (12 strength, 15 constitution, three points in warfare and picture of health perk), the Battlemage as more of a bruiser (14 strength, 12 constitution, two warfare and picture of health perk), and the Enchanter/Wizard as full intelligence.

I also had issues with arena fight on Tactician. Managed to beat them only from third attempt so it's a tough fight. I tried to use as much environment as possible to do lots of fire damage to them to remove Magic Armor and also tried to lure them to walk through oil to slow them down.

Another tough fight was with Houndmaster in dungeon, sneaking really helped there to get high grounds and spread my party around enemies to avoid area enemy hits.

I too think Tactician is hard and having issues with it. Almost restarted with Classic after few fruitless attempts at dungeon before using sneaking.

Not sure about party build but it sounds fine. You should be able to strip both magic and physical armor.

Do you use bottles/scrolls? Do you craft weapons? Did you get gloves of teleportation? They help a lot at fights with ability to teleport enemy archers/wizards closer to tanks or to teleport barrels around. I also made sure my party bought best armor available at traders, sometimes few armor points could really make difference in fight.

No to all of those. I've only used Resurrection scrolls so far, and even then only twice. I always try to avoid using them because I feel like it will be a waste of a one-time use item that I might need more later on. I haven't gotten into crafting, but I managed to get a couple of green bordered items (uncommon?). As for purchases, I ended up using gold on buying hydrosophist Rejuvenation skill for Lohse, and Poison Dart for Fane. I do have the teleportation glove, but I have never tried to use it in combat.

Eitherway I find the game tedious at best on Tactician, as theres no real tactics to it at all. From what I've seen enemies have near perfect immunity as long as they have armor and magic shielding, which most do (outside of basic animal enemies). So at the end of the day, it's either you can burst them down fast enough to apply status effects and get breathing room, or you fail.

I think you shouldn't store lots of potions/scrolls for "some day", just use them as you feel needed. You should also explore crafting, this will help with scarcity of one-time items. I used to store all the bottles and scrolls for "some day" in first game (on normal difficulty) and almost never used them as result, with a lots of items and money at the end. This is not the way to play on Tactician for sure :)

I'm currently at level 5 after cleaning all the enemies in fort and start to enjoy tactics. I try to use stealth to find good position for party, usually physical guys near mages/archers because of their low physical armor and magic users nearby but close enough to rest of enemies to do some crowd control. I usually try to hit as much enemies as possible with AoE stuff (water + lighning or oil + fire) to strip their magic armor while most of the party concentrates on one or two most powerful enemies.

Don't forget about high grounds, gives bonus to damage and allows to keep magic users far from enemies. Also it's really nice to teleport powerful enemies somewhere far so that they have to run few turns, gives you some space to breath.

And do use teleport! It really helps a lot. Can either teleport enemy mage to your tanks, or teleport enemy tank away from you or teleport oil barrel into enemy mob. Sometimes it helps to even teleport your guy from frontline back to heal.

Beginning is somewhat tough and I think it's on purpose to make impression of being weak in that fort. Makes you come up with a way to escape it without killing everyone.

Also I really like armor mechanics. It's a bit frustrating at beginning because you don't have any armor but now I start appreciate it. Shield user is must have with it's special skill to restore armors, as well as fortication and magic armor. Makes you think not only about resistances but also about what to use, physical damage or magic.