I noticed a lot of stuff lying around such as bolts of cloth and bars of metal. Is there a crafting system that I don't know about? And what about other things like flagons, jugs of wine and buckets? Do they have any practical use or are they only good for making a few bucks?

Oh snap what, that sounds interesting. So there is a definite motivation to NOT buy things.

(I have not started yet, I'm just hovering around)

When you first start out, you should be selling anything that isn't nailed to the floor. (Except for items worth zero.) As you keep playing, you'll get a sense for what items are worth your time to haul back from the dungeons, vs which should be left lying on the floor. (If the item is in town and you can turn right around and sell it to a shop, then obviously you don't need to be quite as picky.) Generally speaking, 'mundane' items like dinner plates aren't going to be worth bothering with, though IIRC a few of the fancier cups can be worth a bit of money.

Well, you have to choose - better stuff or better stats :P At least at the beginning, I don't know if you get rich afterwards. You get quite nice rewards for doing quests, too.

And as usual, the best gear is looted, not bought.

The items you get in the beginning matter a lot so it is wise to purchase/find the best quality of weapons. The reason being is that it factors which quality you get for your damage. The most important thing about damage is reaching 12 in whatever weapon skill you currently have. That means-melee, pole, thrown and bows at 12 weapon skill.

Once you get later in the game certain skills like blademaster get even better the more higher your chance to hit is. I believe that blademaster usually gives 1 to damage, however with a high level chance to hit, that is 2 to damage for each skill level. A good investment I would say.

Note-This is only for Avernum 1 and 2 as Avernum 3 uses a different system.

You will want to sell everything that you can get money for period. However in the games that have barter you may want to wait until you sell most of it until you can barter. In Avernum 4+ merchants buy your items for 1/4 the cost so you can safely leave anything under 4g (unless they stack). There is basically a finite supply of cash in these games. Skill/Spell training takes a lot of money, and if you want to try and maximize your returns it is best to sell every little thing, even if it fills up your inv and becomes a pain. I would suggest looking in the spiderweb forums to see more specifics.

P.S.

It is generally a waste of money to buy items from merchant unless its one of a kind or an ingrediant for the knowledge brews. You will find eqivalent items or better just from playing the game.