Zachski: EGA version
If you're a fighter with magic, you can drop your shield to cast spells in combat. Magic Users and Thieves can just naturally cast spells in combat as long as they have the Magic skill and spells to cast (combat-allowed spells are Zap, Flame Dart, and Dazzle). Type "Cast [Spell Name]" to do it (Flame Dart also accepts "Dart", so "Cast Dart" works)
NOTE: you can cast Calm in combat, and this results in an instant game over as your opponent now calmly fights you and destroys you effortlessly.
Only mages get Zap.
You can't drink potions in the middle of combat, you have to type "escape" first and then drink it when you go back to the exploration screen.
VGA version
Mostly the same rules apply, except that the Fighter's not allowed to drop his shield now - therefore, the Fighter cannot use spells in combat. So ignore the below advice.
To use spells in combat, you have to press 5 on the numpad first (or click in the middle if you're using your mouse), which will switch from your combat menu to the spell menu, which also includes the Escape button if you're a magic user or thief. Fighters will instead flee combat if you press 5.
(And for the record, as near as I can tell, this is entirely dependent on class - even if you're a Thief with 0 Magic and no spells known, pressing 5 will open up the magic menu, forcing you to press an additional button to actually escape)
I thought the whole "instant game over from casting Calm in close combat" thing in EGA was silly. And not even in the funny way, (because being
funny enough justifies any manner of nonsensical death) more in the "they missed an opportunity to make Calm result in more difficult combat that rewards you with more exp for the relevant stats if you can survive" way. But maybe this is just me talking as a hardcore RPG enthusiast who doesn't care nearly as much about your typical adventure game.
Healing items/magic will never be usable in close combat until QFG5 removes the distinction of "close combat" entirely - honestly a welcome change, because now enemies won't hesitate to rip massive chunks of HP away if they're strong enough. Far from the massive plink-fest that is the Khaveen fight.
Also, the Thief always gets the second menu because the second menu is for projectiles, not magic. And guess what class always has Throwing and no shield? And just as an aside, I know you already picked Fighter and beat QFG1, but any class can become a Paladin in QFG2 - it's only the third game that restricts the class change to the Fighter if you missed it in 2.