My Party is as follows (from memory edit: not really from memory, but it was going to be originally :p ),

Human Fighter Lv. 7
AC -8 (-2 from Defender Axe)
66 HP
THAC0 6 (with perma-bless item and Defender Axe)

Human Cleric Lv.7
AC -4
47 HP
THAC0 12 (hammer fail +2)

Elf Fighter/Mage Lv. 6 / Lv. 6
AC -1 (at best - can't find ghost armour)
39 HP
THAC0 10 (Short Sword of Lesser Phasing)

Elf Fighter/Thief Lv. 6 / Lv. 7
AC 1 (ranged so not as important)
58 HP
THAC0 8 (Messenger of Sseth)

Gnome Illusionist
AC -2
37 HP
THAC0 15 (sling, Giant Killer)

Half-Elf Cleric/Mage
AC 2
23 HP
THAC0 17 (sling)

I am finding the game VERY hard. I am currently in Dragon's Eye Level 5 (The one with Yxamecafaclacaclacacack (or whatever)) and am having lots of trouble fighting off all the enemies - especially since I cannot rest.

I should be able to finish the level if I go back two levels to rest (which takes a couple of minutes and is definitely NOT preferable) however as this takes a long time I would definitely not like to do this and it definitely wouldn't be what the developers intended that players do.

I have explored every room, every blank space of map and killed every enemy I have found but I cannot do this.

Any help for what to do here would be greatly appreciated.

I am well aware my fighter/mage needs to get stoneskin and ghost armour but I cannot find it as well as most other level 4 spells which makes me think that I am overlevelled (or aren't I?).

Thanks for any help anyone can give.

Edit2: Oh and feel free to critique my party as harshly as possible.

I'd rather have a Human Paladin than a Human Fighter, and a Half-Elf Cleric/Ranger is much better than a Human single class Cleric.
A Druid is also a very useful character in IWD since they get some unique and fun abilities and spells.
A Bard would also be very useful, bordering on cheating, since they have a song that regenerates hit points. I usually play without a Bard to make things more challenging.

Don't forget that Big X can only be hit by +3 or better weapons.
Also, if you can't rest and don't have a Bard of high enough level, a good supply of healing potions will be very useful. Been a while since I played this game, but isn't there a priest you saved on a higher level that sells healing services and potions?

BTW, do you use your Fighter/Thief "correctly", ie for scouting and backstabbing? Being able to plan your fights in advance and soften up the opposition with a well placed backstab makes things easier.

As soon as I get to Dragons Eye the game freezes once I start to battle the ice goblins, What do I do? I bought this game because the copy i had froze up at dragons eye level three the goblins before I reached the last area would not die and I was thrown out of the game now I cant even get inside, whats the deal?

The problem with necro-posting (posting in a long silent thread). The original post was for IWD. I'm *very* familiar with IWD. There are no ice goblins in it, so I suspect you're playing IWD2, which is a completely different game. My suggestion is to start a new post, noting which game you're having problems with. I'm sorry I can't help otherwise, since I've never played IWD2.

There are no icegoblins in Dragon's Eye in IWD2 either, so I think he's mistaken the areas.