There are a few things that make this game borderline unplayable...

The spell system is the biggest one. All the battles I fight are lost if I can't cast spells. And it seems like randomly can just not cast spells. There's no explanation as to why... you just can't. I've noticed this happens when an enemy is on an adjacent tile grid, why is this? It completely breaks the game. I'm tired of reloading after the first two rounds made the battle unwinnable because owyn had some random enemy that he couldn't get away from. Is there any way around this? Every battle I come across is easy as pie when the enemies leave Owyn alone so he can cast, and they are ALL impossible if he doesn't get to cast because there's an enemy that just won't leave him alone. This wouldn't be half the problem it is if the melee wasn't completely broken and luck based.

Which brings me to the second thing that is so unbelievably broken in this game. Melee. Is there any way to quickly level melee accuracy so that I don't have to sit there missing for 30 rounds waiting to finish the guy off? Also, melee is even more useless if you get hit at all since your last inn full heal. Getting hit even once could reduce my already pitiful chance to hit to less than 40-30, which then makes melee just not viable. The only ways around these problems that I've found is to use really cheap levelling strategies, and basically level way way way out of range of the enemies you need to fight, thus making the game a borefest in combat, or pray that Owyn can cast enough to get the party through the fight.

Is there something I'm missing or is this game just old and broken?

1. It was intended to be this way; if someone is blocking the caster, they can't use spells. It is the same with using a crossbow. (You'll learn to be grateful for this later, if you keep playing...) I suggest blinding the enemy who's dangerously close to Owyn and hold up the other(s) with Gorath and Locklear.

2. Click on the "Accy: melee" skill in the character screen; it will make the character pay extra attention to increasing that skill. (It is true for every skill, but if you have too many selected, there will be no noticeable increase.) Whenever the character uses a prioritized skill, it increases more than if it weren't prioritized.
Also, better weapons have higher base hit chance.

2a. There are two separate meters for the character's well-being, Health and Stamina. When Stamina reaches zero, hits affect Health. As someone's Health drops, so do their skills.
You can use Restoratives to replenish Stamina/Health during battle.

+1. You can surprise your enemies, assuring your men will come first (and thus that Owyn will have a chance to cast at least one spell). Click on a group before approaching them, the game will give you a short text (so that you know it acknowledged your action), and when the battle commences, a check is made against the party's character with the worst (as I recall) Stealth skill. If it's favorable, you surprise the enemies and start the battle.
You can read about this on page 42 of the manual.

Don't forget to bless your weapons too.... pretty sure that boosts the melee accuracy too. Also use thrusts only (left mouse click, not right). The game can become a lot easier if you can grind all the way through chapter 1 to get like the rapier and level 3 bless on it. Unfortunately there is some really tough combats that way. If it doesnt bother you, you can retreat after you kill an enemy, rest and try again with less enemies to face. Helps for those 6 on 3 encounters :P Oh yeah visit Lamut and get trained by the inn keeper, I think thats a 10% boost to melee if its tagged. If you need money take the Nurr in the mines a bit to the south.