Use sleep spell or sleep wand on kobolds. Turn undead with your cleric or block the advancing skeletons with a solid frontliner with decent ac and a blunt weapon. Use magic missile wand, damaging spells, command spell, blindness and ranged attacks to disrupt Mulahey's spell casting. If you have a cleric of lvl 3 or higher, cast silence to shut his spell casting and cast hold person to paralyse Mulahey. Don't believe him when he tries to surrender.
If you have a thief you can backstab him for some serious damage. Either use a potion of invisibility on your thief or hide in shadows before the battle begins.
Edit. Depending on your level the backstab multiplier may be rather low, but it will give you a +4 to hit anyway.
The start of the fight depends on how you talk to him. You can lie to him, get the chance to surround him, then focus on killing him while your best fighter blocks the small entry to his room.
It can be a tough fight for a low level party. A couple things to keep in mind, Mullahy's a spellcaster so you want to hit him every round. I usually have Imoen (or another archer) and my strongest warrior go after him. Then the rest of the party can tackle the skeletons and kobolds. The skeletons will take half damage from edged weapons, so use a cleric and/or blunt weapon equipped warrior to go after skeletons. The Kobolds can chew you up with missiles, but they switch to much less effective swords if you close with them. They are also very vulnerable to any crowd control type spells you may have (Sleep is the best!). So incapacitate as many as you can, then close on any still in the fight.
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Edit. Depending on your level the backstab multiplier may be rather low, but it will give you a +4 to hit anyway.
Then the rest of the party can tackle the skeletons and kobolds. The skeletons will take half damage from edged weapons, so use a cleric and/or blunt weapon equipped warrior to go after skeletons.
The Kobolds can chew you up with missiles, but they switch to much less effective swords if you close with them. They are also very vulnerable to any crowd control type spells you may have (Sleep is the best!). So incapacitate as many as you can, then close on any still in the fight.