Either you level up by killing the fishguys by the lake, (a pathway to the east opens up once you have the gun in the screen next to the big tree) or you use the gaslight ability which you can find in the area with the strange mirror. Gaslight counters "emotional" attacks and turns them back on the attacker, which is very effective against Sickened spirit.
Also, check your equipment, some hidden triggers gives you new stuff from time to time. The Jack of traitors card also makes it a whole lot easier to kill things. At level 5 you unlock a new gunship ability which smokes enemies pretty easily.