Are you really expected to be able to fight every monster in the first dungeon? The second enemy you encounter is immune to all attacks.
It depends on your character. You can easily create a character that can kill every creature in the first dungeon, but others might have difficulty. If you didn't choose to receive an ebony dagger or a silver staff from the Emperor when you answered your career questions during character creation, then you won't be able to attack the imp unless you get lucky and find a silver or elven weapon in a treasure pile or on a monster (probably won't happen unless you have a very high luck score). Today I decided I was tired of switching from Mac OS X to Windows XP every time I wanted to play Daggerfall, so I installed Daggerfall on OS X using the Boxer program, and the first thing I did when I finished installing it was to start it up and create a new character, a Nord bard. This character started with an elven dagger so he was able to attack the imps, but it was always a close fight because it only took a few of their spells to bring him within inches of death. Even after advancing to level two and killing every other creature in the dungeon, I found that I could not kill the three skeleton warriors in Privateer's Hold with this character, so I had to just forget about them and leave the dungeon without killing them. Other characters I've played have had no problems dispatching the skeleton warriors.
I think that's one of the truly great things about Daggerfall, that it can be so unforgiving in terms of difficulty. Heh, I remember the very first time I went through Privateer's Hold with my first character, a Breton healer. I was so proud of myself when I first fought my way out of Privateer's Hold and came out of the dungeon to greet the open sky above. Then I tried traveling to Daggerfall, but something strange happened. For some reason, I would drop dead every single time I attempted to make the trip. At first, I figured it must have been some kind of bizarre bug. What the hell is going on here, I thought. It took me some minutes to find out that my character had contracted the plague from one of the rats in the dungeon, and only had a few days to live. There were no towns within a few days' distance of Privateer's Hold with a Temple where I could heal myself, and apparently I had spent a lot of time in the dungeon anyways so by the time I got out of Privateer's Hold the disease was already in its advanced stages and I was about a day from death, so even if there was a town with a Temple nearby it is doubtful that I would have made it. Probably the first rat I encountered gave me the disease. Under those circumstances, I was pretty much forced to start over again with another character.
To this day, that remains one of my fondest Daggerfall memories. I hope that, in the course of playing this game, you will gain many similarly fond memories as well.