The point of this battle is to get some items from BGI (or at least that is the word on the street
)
It was a very tough battle. My strategy was to cast entangle into the room followed by cloudkill spell and fireball. This weakened or killed everybody and I just mopped up with bows/slings.
As for the chests (I hope this is not a spoiler), but try knock spell or a potion of master thievery
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It is better to keep your mouth shut and appear ignorant,
than open it and remove all doubt!