The gold is actually in the possession of the elf chick that wants you to get the supplies. Take the gold from her to your inventory, and get the instructions too. Then go buy the potions from the item shop and the shield from the fish merchant. (Who'd of thunk it?) Make sure you buy the *minor* potions, not the big potions for the quest.
You can sell to the various merchants in the dungeon.
There is one scene where you can tell the elf girl you rescued that she can do more with her mouth then say thanks, but other then that, yeah for now you just watch the monsters molest the girls before you rescue them.
Also is fairly dumb that only *1* party member can use items. 3 vs 1 with the beholders when they put the main girl to sleep gets dicey.