Most of the townsfolk live in the downhill area. Some of the more moneyed townsfolk live uphill.
Many of the things taken from the castle are in the possession of townsfolk. If the characters do a search of the town for things found in the castle, they might run across pool balls, chess pieces, coins, and swords. If they extend their search to the surrounding countryside, they might also find movable walls, kitchen utensils, shovels, rakes, and more. More importantly, they might find the missing (Latin) pieces of the notebook of Abacus Dome, that have been in the attic of a now-dead farmer ever since Abacus tore them from his notes eighty years ago.
Finding these will require networking, talking to people, and gaining their confidence.
The townsfolk are generally very educated. They are proud of their town’s history.
The townsfolk provide cooks, nurses, laborers, laundresses, and other services to the various houses, scholars, and merchants. There are also miners, fishermen, and hunters among the townsfolk, though many also live outside of town.