So I encountered a weird bug. Not sure if this the right palace for it but anyways
I went down and cleared Valammar and then went about to gather all the loot, but I had to go up over ground to sell some 'cause I had full inventory. And when I got back and went through the back door (opens with the two dwarf gears), and got to the room where the "boss" guy was, every enemy in the entire mine spontaneously respawned and charged me.