I persuaded the demon to close the hole in the veil before I went to go kill everyone in the tower.
Then I went to the tower - learned the two Blood Power abilities (for mages it's one that deals a moderate amount of damage to yourself for the benefit of restoring a large amount of mana - which is a pretty awesome ability if your Mage isn't being attacked. The second one deals a small amount of damage to yourself - and deals a larger piece of damage to your target.
Then I killed the Blood Warden - after persuading him to let me execute him instead of fighting him. That let me take his robe (which was an upgrade).
Then I returned to the demon, who was happy I killed the Warden. I intimidated her into answering the merchant's questions. Then, when she was done, I killed her and took her armor
Lastly, I took the sword from the Fireplace sidequest.
Abilities, robe, armor, sword. Looked good to me