There are several things you can do in this town. First go to the inn. Talk to the innkeeper, who's also the mayor, and he'll give you a quest to kill an Ice Pudding that's been lurking nearby. Hug the eastern wall of Southeast Upper Avernum. The Ice Pudding is in a little side branch.
Next talk to the woman sitting at the table if you've been to the surface. Tell her about the surface and she'll give you a Mind Crystal that's located in her house.
Finally, talk to the man sitting in the corner, and he'll sell you a boat for 500 coins. You need this boat to do several things.
Now go into the shop just up from the water. The proprietor, Hmurr will give you a quest to find his missing cows, and he also sells food, though you shouldn't need to buy food in this game, since there's more than enough lying around. The cows are in Southeast Upper Avernum, wandering near the river.
Just to the side of his shop is the boat that you just bought off Gointz.
Now if you check out the apartments to the southwest of Hmurr's shop you'll find that the one in the eastern corner of the block has the Mind Crystal that Nance told you about. It's in some pots, but if you haven't talked to Nance yet all you'll find are some very bitter mushrooms.
Across from the apartments are two more shops. The one to the west is Elspeth's shop. She sells all manner of Iron weapons. The other shop is Miles' Potion Shop. He sells all the basic potions.
Finish exploring the town and you'll notice a building with no doors. This is the bunker. You can't get into it yet, but it will be very important later in the game.