1) The fort is on a hilltop, which I stated in the original post.
2) The underground level and the buildings were what was left of a long-abandoned & remote monastery. The bandit king constructed the wooden wall around the buildings to make it into a fort.
3) The bandit king had put a considerable dent in trade between the 3 kingdoms I had mentioned in another post above, and part of the reason the PCs were in the area was to gain a reward from one of the 3 kingdoms for curbing the bandit activity. All 3 kingdoms have other large issues (wars, or threats of war) that have prevented them from dealing fully with the bandit problem in a timely fashion. Plus, it was also outside of their actual kingdoms, so if one kingdom moved an army into fight the bandit king, the other 2 kingdoms might see it as a threatening move or a land grab.
4) Food was sometimes an issue for the bandits, but they had cowed enough local farmers into giving them food/goods that they managed to get by. They also had bands of bandits out and were expanding their turf beyond the immediate area of the fort in an attempt to get more resources. The 100+ square mile lake also provided ample fishing for the bandits and they did do some of that.
So you have a lake that would probably be in the top 20 largest inland lakes (excluding the Great Lakes) in the US, but there are no villages or cities taking advantage?
The lake you're speaking of would be a little smaller that Redwaters in Icewind Dale... In an unfavorable climate it supported two small cities (Dougan's Hole and Good Mead) that together would have had a population above 12k...
I'm assuming you're going off of Kingmaker's numbers. Don't. Kingmaker is... Humorous, to say the least. With such an obviously hospitable terrain the bandits may, admittedly, have cut trade... But they didn't just wipe out all civilization. Have emissaries come from the local towns within a week after the attacks have stopped and the Sword Lords (or your version) send their tribute... The people are ready to build again, and would love to have order back in their towns. Make your game real rather than take the guys who created creatures so ugly they sicken each other's words for it

Slainte,
-Loonook.