I finished an impossible Paladin game with no losses last night. You can complete a stack of quests before you even start fighting. On another thread I named 22 quests you can do with only fighting the Robbers and the Turtle.
Dismissing units doesnt count, only losses in battles count. I had some evlins eat some of my army and they didnt count.
Because I dont start fighting until I'm about level 6 it makes the battles alot easier as my army is pretty good. You should go to the Alchemist guy in the Marshan Swamp and get some Alchemists off him, they are great for early in the game. Also, when you recieve the potion from the witch to blow up his little chemistry set, make sure you 'use it', the result is quite funny. (If you havent done so before).
My army for most of the early part of the game was Archers, Inquisitors, Griffins, Alchemists and Evil Beholders (from Western Islands).
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