I must be dumb as a rock. Hands are bound in keep and need to get out of town. Have no idea what I am doing wrong. How do I interact with others in the keep and where is the path out of town? Have played Morrowind and Oblivion but never have been stuck in first quest.

First you follow Ralof up a tower, then follow Hadvar until he meets up with Ralof. You then have to choose to follow one of them, doesn't really matter which one, and after you get inside, he'll cut you free.