All Mobs are Overpower

[sector24]

Demonis is definitely too difficult at that point in the game, but it's a good idea to sneak around there and grab all the items. You will get access to a lot of the higher level spells in the game and possibly new artifacts. As for where to go next, you should finish the main storyline quest which is to sign a peace treaty with the dwarves and then return to King Mark. He will then send you to the Elven Lands.