Tzabaoth: In some battles, my characters lose the ability to shoot arrows, or throw flasks of oil at monsters. Sometimes it happens immediately, and sometimes it happens partially into the battle. I see no logical reason for the problem. Flasks of oil are readied, and arrows are readied. I can choose 'manual', but then 'target' is not available. I only see 'centre'. I have also had casting of spells removed. 'Cast' is not even an option, but the spells are memorised. This makes no sense. This game was installed from a Compact disc.

kmonster: Are your characters affected by blindness or your opponents affected by invisibility ?

krachtm: The GOG versions of games are sometimes slightly tweaked, such as installing unofficial patches, cracks to remove DRM, etc. That said, the problem is likely that you're trying to target someone who cast Invisibility, Blink, or something similar. These spells make it impossible to manually target them in combat. Target a fireball spell on the tile beside them, and it will explode in their face. Or engage them in melee combat by walking onto their tile.

PetrusOctavianus: You character is already engaged in melee, so he can't use missile weapons.

The only exception to the rule is that in the Krynn games, Kender can use Hoopaks both as melee and missile weapons.

BTW, a Sleep spell works wonders in that encounter.
And a Hero from the training hall as a meat shield is not a bad idea.

Andvari_Nidavellir: A few other things that may confuse you: Bless doesn’t affect allies adjacent to enemies and invisible creatures don’t look invisible on the screen, but are untargetable from range.