Yeah, I'd start over from the point where you get out of your cell. You passed up some good stuff, including a Moon Rune. Be sure to look around and loot everything you can get your hands on.
There will be some decent clothing & stuff, don't expect plate armor, though. Don't be afraid to explore around and look, for example, there's some nice stuff in a basement torture chamber.
You're still a pretty weak Witcher at this stage, so try to not get hit, yes. You're biggest challenge will be groups of guards (more than one), if that happens, use hit-and-run tactics and try to only face one at a time. The best way to take out guards, of course, is to wait until you can approach them from behind, then it's mouse2 - knock them out.