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Um, there should be no message that you can't use magic in the city. Perhaps you're misreading it? You can use magic all you like. But if you don't pay for a license, you'll be attacked by Cowled Wizards for using magic.
As to vampires, have you read the spell lists for clerics? If so, you know what you need to do. And don't you have good weapons? You should have done some quests by now, and acquired a few nicely enchanted weapons to use.
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