I loved this one!
I pieced together that the villagers were lying after my second run. When the potion only healed 3 HP, I wasn't sure if it was a bug or a joke or something, but then died to some roosters after missing like 10 attacks in a row. I tried using the default weapon, which worked out much better, and confirmed my suspicions.
After that I deliberately ignored the advice from the villagers and explored on my own. I almost got to Jamestown taking the eastern route, but succumbed to a lack of healing.
On my winning run, I decided to see what actually happens if you follow the southwest path. I didn't encounter a single Vigilante (I didn't even know they existed until reading your notes) and made it through successfully. It surprised me that I made it through, but I didn't think it was a bug, I just assumed maybe not everyone in the town was bad and you wanted there to be some ambiguity about that.
By the time I first encountered a Griffon, I was already suspicious of the townsfolk, so I did the opposite of their advice and clonked it on the head. I never actually died to a Griffon so I didn't even know they did anything other than increasing their ATK.
The arc of realizing the villagers are tricking you made me feel clever, and then a sort of loneliness set in as I realized I had to find my way around this harsh world on my own with only my wits and 6 crappy overpriced potions to keep me alive. The theme of racism went completely over my head though, I just thought "oh, it's like Simon's Quest or something where the villagers lie to you"....