[Gimli]

This was happening to me as well, it was because I had killed Rattus Rattus - check your faction ratings in the journal, I bet the Rakuza are "hostile" towards you.

As for whacking the Don, I did it at 9th level; used this strategy. Bought all the front line chars granite potions and potions of razor cloak, also had a couple of superman ones. Round 1 I opened his door, backed up into the hall way a little and cast a sonic boom to get his attention. I got 2 rounds to prepare before we went at it, by then I had quaffed lots of potions and had my casters also place some guardian angels on the fighters. When you fight him, forget magic, he's mostly immune, just use that to cure your chars. Also you might want to give each one a potion of restoration to deal with any poison and damage he can do. If you can get a canned elemental that is nice as well, or cast it if you've got any pure 11th level casters.