Werewolves are tough. A hint: Thrusting has a higher chance to hit than other attacks, but lower damage. If you can't seem to hit something, poke at it.
As for the main storyline, you should receive a few letters after a while, hinting at what to do next. Lady B suggested you seek out the royalty of the 3 main kingdoms of the bay. There is always down time during the main quest; the game expects you to do a little of the story, then a few odd jobs for your guilds or other adventuring, then pick back up with the story later. It's not really made to be done all in one sitting.