Elwin - Yes it's meant to be overly difficult.
The mission describes it as a dream, i think their objective was to just give you swarm after swarm (increasing in difficulty) to see how well you can control your palace, finances etc.. when under constant seige.
As Nike suggested to me, get alot of Clerics. They are very handy when they accompany other heroes into battle.
The almost constant healing sound gets annoying after a while though.
I wouldn't be buying towers until later on, early in the mission your heroes need any chance to gain XP, plus you can save some of that money to upgrade your items in the blacksmith.
The mission goes for 75 days i believe, i had only managed 69 on the demo, but i played the mission through on the full game and managed 74. (but for an entire "day" my palace was being destroyed by werebears
)