Yesterday I finished the game on Impossible with Paladin. Seemed like the best tactic is to max out the Holly Anger skill and pick Demons as enemies. And it worked, first three battles were pretty easy compared to ones in my previous attempts. Also, 20000 gold for medals seems like too much, but it isn't, especially since you can take 20000 gold from that random guy in the first castle. One or more 5th level units + Healing spell was also very helpful.
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