The Burg is the right way to go : ) Don't bother with the ghost-area for now, you'll have to go there much later. The soldier is a Black Knight I assume? He's optional, you don't have to fight him.

The big demon is the boss you want to defeat to continue. Some tips; there is a ladder leading up the tower, you can do some drop-down attacks from there. Items like firebombs and gold pine resin will be a great help.

Good luck!