SPOILER ALERT: Don't read this section if you'd rather figure it out yourself you don't want a super effective strategy to beat the game.
Here's a couple of strategies for the game. First, in terms of game layout, I didn't build my town in blocks, but rather in one long road. The inn, and the houses were at the end of the road, so any time my adventurers needed to heal, or rest, they had to walk past EVERY building I had.
Second, early on use every misc. item you find to build up your town buildings instead of using it on your adventurers. This will pay off with income later, which you can use to buy misc items, and use them on the adventurers, but at a later stage in the game. Especially upgrade your inn, because, although you won't be able to get it up very high (it maxes out at 900) it gets the most use in the game.
Third, not every building is the same, and you really don't want every building. Each building has a "bonus" it gives to an attribute, so rather than pick a building like the cake shop that only gives a +1 to health, build things like the archery range, the circus, and the combat school that give multiple bonuses, and that cost a lot to use. In general, focusing on a fewer, high powered buildings, rather than one of everything, is definitely the way to go. By the end game, I had 20 buildings (not counting houses) and was very happy with my income.
Don't worry about the quests that much. They're good, but there's a lot to be said for not always focusing on them.
Once you've got your income up, buy lots of items each time they become available. This is useful for the cauldron, but when you give items, it's also a super boost to your popularity. I'd hand out a wave of items and when I came back to "real time" my popularity would jump 300 points, and I'd get 3 medals. I was getting 12-13 medals a year near the end. This gets a little boring doling out the gifts, but it works.
That's about it.