You leave the Town after getting everything you need for your quest but when you get into the woods, you encounter a Female Kobold, despite what people say that Kobolds are smaller than Humans, that could not be any further from the truth, this Kobold is about the size of a normal human man about the same size as you.
The Kobold does not look that tough, you could probably either kill her or knock her out if you hit her with your sword 10 times but there is a chance she might call for help from other kobolds and then you would be surrounded, but if you are able to fight her alone successfully, you must be careful as she only needs to hit you 3 times to "kill" you and drag you back to her cave and turn you into a Female Kobold like her.
You could also try to run away and escape, if you are successful then you can potentially save some of your hit points, but if you fail she will kidnap you and this will count as an instant kill against you and you will be brought back to her cave to be transformed.
You currently have your sword, shield and armor, and you can currently take three hits right now, you only have one life right now so if you "die" now you will be kidnapped and transformed into a female Kobold.