In the interest of not having to post two of these in one day, or one super long post, since we're playing again tomorrow, here's a summary of how we got through act I of Poison:
The PCs returned to Melwan and gave their report on Varn to the council, which regretted to hear what happened at Varn but didn't blame the PCs for revealing Deorn's crimes publicly. The council offered the PCs food and lodging for as long as they needed to rest in Melwan.
I shifted the timeframe of Poison so that the PCs arrived right when Manec Mac Lyr died from his illness, so we played out the funeral scene, which I thought added some color to the session.
I used this downtime to have some character development driven by interaction with the colorful personalities around Melwan. Some examples:
-The PC Saeth is a son of the Mac Lyr family, so he stayed in his family's castle as his mother tried convincing him to move back home.
-Furthermore, I decided that, since Saeth has the Paranoia disorder, it should run in the family, and both his mother Maoda and brother Peran should have it. Maoda told Saeth that she suspected Peran of poisoning Manec and Erwan so that he could take the throne -- I decided within that scene that Peran would become an antagonist later in the campaign, if Saeth's player decides to pursue that lead.
-Wailen the Demorthen kept pestering the Temple priest, Father Harn, by flirting with him and trying to talk theology.
-I encouraged a romance between the PC Ned and the NPC Maltaria (the innkeeper), and the player accepted that hook well, using his PC's crafting skill to make a wooden jewelrybox with a heart-shaped lock. Father Harn also got involved by telling Maltaria parables of love and patience.

-While this was going on, I dropped several clues suggesting that more people were getting sick.
When the PCs were ready to leave, I had Wailen summon them all together and ask them to collect herbs and had Ergor the hermit appear, speaking prophecies of doom. When the PCs asked him questions, he gave cryptic accusations and then quieted down and left, but not before lifting an apple cart up over his head and throwing it across the courtyard, causing a panic in the crowd!
We handwaved the journey to Dearg, but on the way I asked the players to make Stamina rolls, but didn't tell them why. Three PCs -- Saeth, Ninel, and Ned -- failed, but I rolled a 10 on the roll to see what form of sickness Saeth had, so his symptoms cleared up the next day. Ninel contracted temporary madness, and Ned had malignant poisoning and madness!
To handle the disease progression, I started tracking the days since the infection and reminding Ned to take his damage every day and describing his increasingly feverish state. Since two PCs were mad, though, I had to also come up with delusions for the two PCs to see, which they first encountered in feverish dreams but which began bleeding into the real world.
On the return trip, they were attacked by the bear in the middle of the night. However, before I could continue describing the bear lurking around the perimeter of the chapel and banging on the doors and windows, Father Harn threw open the door and challenged the "demon" threatening them. He was subsequently mauled by a bear.

They killed it just fine, though I did fudge the bear's first attack roll because, without fail, in the first round of every combat I always hit Father Harn and always roll a 10.
Upon return to Melwan, the PCs discovered that even more people were getting sick and that it was reaching crisis levels. The players quickly hypothesized that it was being transmitted through water, and Nesa used her vision glasses to examine the water, which I ruled as an instant success and told the players about the amber-colored particles in the water. Wailen summoned the council immediately.
The council meeting scene went all right, though I perhaps gave the players too much breathing room given how tense the atmosphere amid the crowd was. To rectify this, when the players began calmly discussing the matter amongst one another, I had people in the crowd start accusing various people of intentionally poisoning the well, including Ned, who has the Rumor setback and thus isn't widely trusted in Melwan. This is where I had the trouble making a ruling on Father Harn's Divine Cold miracle, but the important thing was that I hit all the main points -- the various plans for getting fresh water, the various accusations -- and got the PCs to agree to help investigate the source of the water pollution.
After this, the PCs were summoned to the Mac Lyr castle, where Maoda offered them a reward if they brought the person behind the poisoning to justice. There, I had Veig the soldier, who also got sick at the same time as Manec and Erwan Mac Lyr, greet Saeth and mention that he, too, got sick. This made the players investigate further, whereupon they learned that no one else in the castle had gotten sick since the outbreak started and came up with the idea that the castle's well hadn't been poisoned, but also suggested that the village Demorthen was killing certain people while treating them.
The players wanted to investigate the river upstream, but I noted that the day was drawing to a close and that the best time to travel would be the next morning. During the night, Ninel had the dream of the snake skins and the giant snake. Unfortunately, one of my players turned out to have a phobia of snakes in real life, which made this scene unintentionally uncomfortable.
However, the next day, Wailen had finished her remedy and gave some to Ned and Ninel. As the party left, they heard screams coming from one part of town and found Naelan on his deathbed. I had them all make mental resistance rolls upon witnessing his mutilated face. Interestingly, both of the female PCs succeeded on their roll, and two of the male PCs were scarred and burst into hysterical tears.
Next time, the players are going upstream to investigate. I think their plan is to avoid interrogating anyone until they've tested the water to see how far upstream the contamination goes. However, two of the PCs will have to contend with their madness at the same time! I'm thinking of testing the PCs' Influence to see whether they are able to resist the delusions that they experience.
EDIT: And some ideas for delusions...
Ned sees Maltaria appear out of the corner of his eye and beckon him to do certain things, draws him deeper into the forest, etc.
Ninel, who's carrying the Amber from Loch Varn, will have delusions relating to that, hearing a voice from within it call out to her.
The affected PCs will see the land blighted with pestilence, the village in ruins, etc.