Mitsuki: I didn't have any troubles keeping the NPCs alive (at least, not the second time around; first time I kinda just winged my way through the game as a Mage with Fireball. xD) in that quest. Did you do all of the side quests before you skipped to nightfall? Boost morale with drinks/the Chantry's blessing, intimidate the dwarves to take part, get the blacksmith to help out by promising to rescue his daughter, etc. I think there is something to add fire to the village defenses at the start as well; the men are all pretty resilient if you do all that.