This is my first time playing DD, and I am finding the difficulty to be rather intense. I am wondering if I am doing something terribly wrong.

I am playing a warrior, level 8 right now. I am to the point of the plot where I am in the village south of the castle and I need to poison the orc water supply. The only weapon I can yield is a cracked dirk because my strength is at 30 and my agility is at 23. The only swords I have found require strength 40 and agility 30 so using a better weapon is a long way off.

Anyhow, I cannot handle the orcs running around the village at all. I get ambushed trying to go into the tent camp and last about 10 seconds.

Have I gone too far into the plot too early? Should I go back and grind out some levels before entering the story line at this point?

Did you finish off the catacombs and restore Mardaneus' sanity in Aleroth? Cure the two patients that Otho and Goemoe have? You should complete both of those before doing any of the quests that give you an invitation to the castle (like the pair of quests the army has for you).

After that, if you've cleared the area around Aleroth (don't enter the troll cave near the bridge until getting the quest to do so from one of the farmers), then it would be easier to explore the northern part of Rivertown than to the south. After crossing the bridge into the farmlands the area north of there contains undead that are relatively easy to take out with a bow (Spell Shield would help a melee character with their poison attacks), but the cursed abbey should be left until you are in your high teens or early twenties for character level. The north east is easier than that, especially if you stop by Ars Magicana first and find better equipment (there is a travelling merchant on the path north from the bridge to the cursed abbey, who you only meet once). For the south, the western part IIRC is easier than the eastern, so you should leave the orcs until later.

If you really wanted to poison the orc well now, a spider statuette would let you walk into their camp; you'd just have to be quick transforming back to human in order to drop the poison in the well, and make sure you don't hit the time limit when there were too many orcs around.

With my warrior I maxed Spell Shield and Aura of Guarding with purchased spell books: Free skills, and spell books you can buy.

Thanks for the tips. I went ahead and started clearing the orcs that seem to be all around the area just south of the starting point and that got me up to level 10 and the abilities to use a bow which helps a lot. I have done the catacombs as well as curing the patients. I think it has been so long since I played a game that is as open as this one so I just figured I should continue on with the main story rather than explore to gain experience.

I mispoke a little earlier when I said where I was in the story. I have been given the explosives not the poison (I spoiled myself a little bit when I was lost for a time and read ahead a little farther than I meant to). Is there a time limit on the quest or can I just wait until I am strong enough?

The only time limited quest involves arson; if you accept the quest it needs to be done that game day. If you get an invitation to the castle before curing Mardaneus or the two patients, or arranging an escort for the healers, you will miss out on those quests (the healers move on their own, and Mardaneus returns to normal).

In general you can explore as much as you want, and put off doing the main plot quests. You can also put off doing side quests, though eventually you'll want a break from combat / exploring, to clear out your quest log or get some experience to level. Quests give more experience if you are at a higher level. I'm sure you noticed by now, but opponents give you more experience if you are at a lower level than they are, and less experience if you are a higher level (eventually giving none at all).

The game pretty much employs an "open" world and as a result there are places you just can't handle until you are of a higher level. Wander around, kill things, save things, save the game often, and when you are of a higher level try the Orc Poison well quest.