The knight is insanely powerful. The big boss is actually a piece of piss. I'd recommend watching the Giant Bomb video I posted on the previous page to everyone - it really helps give you a good understanding of what the game is about and how to play it. The big boss on the castle walls can be killed in any of about five or six ways. You can even make him fall off the wall to his doom! Personally I used an item I found earlier - pine resin or something - it coats your weapon with electricity which knocks some serious HP off the boss. I didn't even have to bother with jumping off the ladder to kill him - just rolled around and dodged his attacks, slicing at him.
As for selling items - apparently there's a merchant later in the game who'll buy stuff off you for souls, so don't drop anything. Although, apparently dropping items will send a "crab" creature to another person's game (chosen randomly) that is made out of the items you dropped. The more items you drop, and the better they are, the more badass the crab will be and more likely it is to ruin some poor fucker's day.
Any way, back to inheritance tax tedium. Hopefully I'll get amongst it again before bed.