So in the market square there is a basement in the north region (near the undead). There I have the option to clear rubble but the first three times I click it, I get attacked by some demons and receive cold damage. After that I just keep getting cold damage when trying to clear the rubble. Am I overseeing something? I tried fire damage and cold resistance to continue but no avail.
There is a hidden ghost in this area and you have to beat it to progress.
In the room with the skill check, there is a pile of rubble on the ground at the opposing side of the room. There is the ghost. Sometimes it appears by itself after some time. Or you cast an AoE spell in his direction and it will become visible when you hit it.
Be careful, it has 3 powerful touch attacks per round ( it will likely hit you and cause lots of damage ) and as a ghost non magic weapons cannot harm it and magic weapons do only half damage unless they have the ghost touch ability ( I did not find any such weapon. )
Glitterdust and Camellia then
A potion of resist cold will help, as part of the damage from the touch attacks is cold (when I last did it once you actually get the creature to fight, half of its damage was cold and half negative energy).
You can use your Light of Heaven ability to reveal it.