On to the changes:
If your magic item crafting is out of hand, take downtime away. Immediately upon beating Liebdaga you give them like 3 days of downtime and proceed to rapidly progress storyline. In order to do that you need to replace the NPC with another NPC the players care about. By this time I had murdered Arael and forced Janiven to flee the city (The players weren't enchanted with them anyway). One player had a noble house that had been backing him all game. HE introduces the mother of flies option. When they get back and walcourt needs to be dealt with, steal Mr. MacGuffin's wife, kid, or something else. This should keep the party consistently moving. If they sit around, start sending peices of the captives back to them. Ilnerik is EVIL. Play him as EVIL.
The first encounter is actually functionally dangerous, but you just need to set the ambush a little better than the book does. First, add windows to the shop. Use the dead body of the initial contact as the bait and let them start investigating it. Plug the door with Kruthe. Use thieves climbing through the windows to throw in all of the necklace of fire globes (You did read page 13's sidebar, right?

), while Maglin sneak attacks them through windows with his crossbow, continually breaking line of sight and getting his stealth on. Maglin will eventually get caught. If he gets away, your oracle will commune him out of hiding or something. If he STILL gets away, prepare to replace a mook in walcourt with him later.
The lead up war in hagwood can be cool or it can be lame, but it really depends on how you frame it. You don't actually have to do the encounters before the main one, but you can if you think they're cool (My magus in this game sovereign glued himself to the beetle and rode it into the army blowing a Horn of Fog. See what your players do with it. Hilarity should ensue.) The redcaps and their boss are a bit boring but a great little encounter to wrap a session up with if you have less than an hour remaining.
The war itself looks incredibly daunting to run as a GM at first glance, but the trick is this: This is not an encounter, it is a puzzle. You let your players sneak up on this encampment (don't make them make checks. It's a freaking war encampment. It's louder than they are and no one will notice them unless they make themselves known). Let them get a good look. Then turn to your casters and say the following: "Show me how stupidly good spellcasting is. Deal with THAT. Be all the broken you can be." Then proceed to let your players roleplay out countersiege tactics with magic. My players used illusion spells, persistent AEs, and a HUGE ARRAY of other magic as the hammer and the mother's tree as the anvil. Everyone had a great time and it is one of the first moments in the AP where the players finally get to punch the council right in the face with a resounding CRACK. Let their plan work, hand out the EXP the module is designed to hand out (They should be leveled or near close to it.)
Walcourt. Have aforementioned Mr. Macguffin's kid/wife/mom/significant supporting NPC kidnapped. Keep the AP moving. The players will want to immediately save the day. Things to note about walcourt include the fact that all of its residents see in the dark. Therefore there is no light inside. At all. Players are walking torches if they're carrying the morrowfall. That gets attention.
First, look at the way the dungeon is set up. 99% of the groups will go through the secret door from the Ogre-Magi groundskeeper's home directly onto the second floor, or they'll climb up the hidden area at the front and die to some CR4's with the noose. All the other doors are too well hidden to see. That means the lower floor is basically bonus dungeon unless they go through the guillotine trap on the lower floor. They'll die if they do (auto reset on a 10d6 trap that can CRIT YOU for 20d6? Yeah, the first person to lose their heads will stop that nonsense). The trap does so much damage that nothing can really break it aside from disabling. It'll cut through steel like it was a watermelon. This is good. Let your party ignore it and access the second floor instead. Preferably by tricking them into having tea with the ogre magi so she can start the fight with a proper cone of cold.
The second floor only has one major flaw: Another X thieves. Your party should jump them if they're coming from behind. This is an area where it's good to encourage your casters to place level 3 and 4 damage-over-round spells into rooms and then close doors and hold portal. The correct answer to "Another X thieves" encounter is to turn to your party and ask "Will it blend!?" and just make them burn a couple spells. The other alternative is to have sandor spot them with prying eyes and have the thieves set up a massive ambush just before sandor's room. Sandor is scary on his own, but with 10 minions he can be downright deadly since he has a wall of dudes between him and the party. (Hint, open with the Fear spell on his staff and laugh. Use lightning bolts to blow out walls and hit the feared targets, because the prying eyes didn't go away and are following the party. Finally, if all else fails, disintegrate a bitch.)
The first floor is a rogue training course. Let your rogue or ranger or other non spellcaster run it solo while the rest of your party is resting and regaining spells after Sandor the strange on floor 2. The super secret hidden entrance on the right should only be visible to someone who sees the traps in the ivy. The door is impossible to percieve until you realize that every other square of the ivy is trapped. Then it becomes rather obvious. The lower floor would normally be a really easy thing to do with a party but alone your rogue will get overwhelmed. As I always say, stealth makes anything fun, even terrible encounters. The need for stealth makes the lower floor far more entertaining because unlike other low CR monsters, Dark folk EXPLODE. Set up every encounter to allow dark folk chain reactions of explosion into light blindness. Let the rogue set up silly ranged sneak attacks (think games like tom clancy's splinter cell) to start the encounters leaving the enemy blinded (Mine was a ninja and had assassinate, but you can easily get the same thing from good sneak attack rolls). This proceeds to let him probably not die and get constant full attack sneak attacks, and otherwise gives him the chance to BE A ROGUE without having to deal with the party. Ideally you do this during a break in the sessions one on one. This honestly takes care of 75% of the terrible encounters in the book. Don't give the rogue solo exp, give it out to the group to keep them paced. This also speeds up book 5 by a mile. The only scary thing the rogue needs to worry about is the Morhg in the southeast rooms. I would make sure it doesn't kill him. Oh, all the loot down here is awesome for rogues too, so it works out quite well.
The basement is generally a slight challenge.... Until you realize that Sandor the Strange should get away with his shadow walk scroll, and most parties will have a forewarned basement. Add in that shadow mastiffs will warn the basement if sandor doesn't, all parties will fight a partially forewarned basement. Bay is a great alarm system. That being said, your party must approach a forewarned basement fully rested or they will die. Let them leave and come back, or fortify a room.
The vampire spawn exist to drain the morrowfall a bit. Silana and her shadows are good for that as well. But it's the nihloi that's the definitively awesome encounter. Finally Ilnerik should play out in pretty much the following way: I am invincible! I am crit by a morrowfall unleashed searing light! I am slain! Set up whirlwinds if you can and hit the players with slams dealing negative levels. It's like a fight clock, you die in 8 rounds and it gets harder to win each round. Note that negative levels
do not give a save until 24 hours later Your cleric should be scrambling to keep people alive with the restoration wand handed out earlier in the path. If your paladin accidentally a Vampire? Well, frankly if he's been able to save a smite through all the evil things down here he deserves to kill Ilnerik. Let your melee fighters BE MELEE FIGHTERS in this fight. Also, keep dirge of doom up at all times with full combat expertise. Don't let your players hit him for free. Longer fights favor Ilnerik due to fast healing. His final AC should be 34 with players taking -2 from dirge of doom and further penalties from negative levels. That means your players need a +24 to hit him on 10, and while the smiting paladin can do that on attack one, attack 2 needs a 15. Trust your AC.