Right at the moment, these are my options:

You are inside the outer wall of Llagimlyn. The city is smaller than Larosis, but there's still quite a substantial amount of land area within the walls. The city looks mostly residential, but small businesses are mixed in amongst the houses. Far to the east end of the city, partially visible above the houses and shops, is a lavish castle, also lined with battlements. If the outer walls were ever breached, attackers would still find it difficult to penetrate the defenses of the castle itself. A cobblestone road leads east to a main intersection.

The portcullis is closed. Just to one side is a small entry way that leads up to the gatehouse.

Reread the introduction.
About this game.

Go east.
Enter the gatehouse.

Listen.
Lift the portcullis.

You're Carrying:

20 Bronze Coins

Food Rations

String

Hammer
10 Red Gemstones

Rope

Wire Clippers

Blanket
Guard's Sword

Tinderbox

Clear Focus Stone

Map
Stone of Strengthening

Sticks

Crate

Picture

Okay, Gees. I did what you said to do and went back to the stables. While in the stables, first of all, the stablehand immediately notices his hammer and takes it away from me. If I ask to borrow it, he won't let me. I have already asked about Sea Nymph and I don't have enough money to buy her. It gives me an option to examine her, but that does not seem to do anything, even when I click on it multiple times. Then, before I leave, I end up having to repeat the process required to get the hammer then leave the next time the stable hand leaves, because if I try to leave while he's in the barn, he notices the hammer again.

I still have not found anywhere that I even get an option to use the red gemstones.

I am getting really frustrated. I must have done something wrong somewhere and am now stuck for good. I'll probably have to start this game over again and boy was it a lot of work so far!