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Nalia is either a) in the copper coronet [slums district] or b) at her keep [if she's there it'll be on your map]
As for beating the wizard: yes it's possible. Try running away (hopefully you have some item like kitthix which can be used to summon something, always useful : ) and wait for the protections to wear out. Then go beat him up. It's much easier with a mage or even a priest however. If you can, have Yoshimo Hide in Shadows and backstab him. Same with Valygar.
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