Elfeater, to answer your question:
Sheepstead began as a herding village. While we've had an influx of trade, and some chaos in the form of bickering nobles, it hasn't really grown that much. If it was filled with gangs and strife, then the King would be dealing with it, but for the most part it's pretty lawful. Laws are also pretty relaxed in Elbreth, though.
There are not roaming gangs and rampant violence and the like, but with a city of its size there are at least a few small groups of thugs and seedy sections with pick-pockets and the like. You probably ran afoul of one of the very few 'real' gangs in Sheepstead, in fact.
I'd probably liken the climate to something similar to the Imperial City in Elder Scrolls: Oblivion. Most of it is pretty lawful, and the palace guard frequently can be found wandering the streets preventing crime (though much less so in these times of war, and so that's probably why there's actually an organized crime element now), but there are a few sections, mostly on the outskirts, where the impoverished live and as with any impoverished group there's bound to be crime.
So, working off of someone else's post regarding Sheepstead...
Sheepstead forms a massive, sprawling circle around the palace of Elbreth. The streets are narrow, and haphazard which can create a bewildering sensation for newcomers and likely causes a lot of people to get lost.
At the center is the palace, which is not in any way a defensive structure.
Just outside the palace is where the rich merchants and noblemen live and work. Here the streets aren't necessarily clean, but the houses are fairly large -- possible two stories -- and the people are snobby and well-dressed. There might be a tavern that's frequented by the rich. There is a blacksmith here who has a suit of steel chainmail that has somehow been dyed black on display -- it isn't for sale.
Just outside of that little circle is a large circle for the middle class city folk. Here the people wear tunics and britches, they're not necessarily rich but none of them are starving either. Lowly merchants, apothecaries, craftsmen, regular blacksmiths and the like can be found here. There are a few taverns scattered throughout, and the ale tastes like piss but it's a safe place to go and drink. You're likely to run into a few off-duty soldiers in whichever one is closest to the palace.
Just outside of that is where the poorer peasantry live, and that's where you'll find crime. Here are the sort of people who do whatever is necessary to get by, and they've built a sort of shanty town. It's not particularly overgrown though. Many of them work as farmhands outside of Sheepstead. Here you will find two or three run down dives where people regularly go to drink.
And just outside that is open fields and hills, filled with farms and grazing land.
There might be a few mercenaries around, you'll have to look around.
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