So I've played this AP twice and gotten reamed both times. I want to make sure I'm interpreting card affects correctly and not giving myself a disadvantage.

***SPOILERS TO FOLLOW***

FIRST DEFEAT:

First off, there is a treachery card called "Freezing Cold" that (among other things) gives a hero -2 on Willpower.

Secondly, there is a quest phase (3B) that says "Characters are discarded from play if their Willpower is ever 0."

Since most heros have willpower of 2 or less, the Freezing Cold attachment will give most heros a willpower of 0.

The first time I lost, I had two heros (Bilbo & Dunhere) with Freezing Cold, so as soon as I flipped over 3B they were both instantly discarded from play. :-/ Game effectively over.

Is this interpretation correct?

SECOND DEFEAT:

To compound matters, the active location when you start 3B is Caradhras, which says that "questing characters get -1 willpower" while Caradhras is the active location.

Finally, there is a treachery card called "Avalanche," which says "Exhaust each ready character and if it is the quest phase commit them to the quest."

So the second defeat occured when I had a bunch of allies with a willpower of 1. Then I started 3B, travelled to Caradhras and flipped over "Avalanche" from the encounter deck. So about 6 allies with a willpower of 0 (due to Caradhras effect) were insta-killed (due to the 3B quest phase effect that characters with 0 willpower are removed from the deck).

Did I interpret these situations correctly?

You did. This scenario can be pretty brutal to low WP characters. I'd advise keeping a cancel or two handy, if you have them.

And Miner of the Iron Hills is, as he usually is, very handy indeed to get rid of Freezing Cold before you hit stage 3.

And for Caradhras, if you have cards that place progress on a location (Ride to Ruin, Riddermark's Finest, NT), pump Caradhras up to 7-8 progress while it is still in the staging area and when you hit 3B, clear it before the next questing phase.

Excellent advice everyone! Thanks.