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Some of the best items do drop indeed there, but remember this - the Watcher's Keep came with ToB, which generally presumes that you have a char who has gone already through the BG2 once, i.e. is of adequate level. Lvl 10 is too low, and it gets worse with each floor. Rather, go back, do quests, things and stuff, and return when your team has higher level(s). I.e. when you return from the Underdark and are headed after a... thingie... for the elves. If you have done all the quests and such before that, you should have then better levels under your belt for Watcher's Keep, and it will be easier.
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