For one thing, it does a good job of slowing itself up (which isn't a good thing). Until you talk to Ro about getting the rooms, you can't talk to the other two who obviously wandered off to do their own thing because they aren't even accessible/there. Once you've done that you can only find and talk to Sara who has suddenly appeared somewhere. And then you are transported to the Inn? I don't think she needed an escort to her room. It was distracting to say the least. And to find Lily, you had to go in a place that you were told you didn't need to go near because apparently Lily is an ex-(still?)drunk which we never really knew about.
Perhaps a hint about that might help. This is the bit that stands out to me the most. For example:
Jarett says, having jumped away from the pub's door, "No reason to go there...".
Well, that's great and all, but why? Maybe something like: "No reason to go there... not after that day that Lily..."
We know Lily having already been introduced at the start. So, now we see "Pub" and "something happened in one of those with Lily that Jarett obviously doesn't want to talk about." So we'll get the idea.
Then after talking to Sara, we just get told to find Sara. Well, how about if Jarett asks Sara where Lily might be found. Her response could be (as I assume these 4 are good friends):
Sara: "I'm not sure. But she hasn't seemed her normal self since that day..."
Jarett: "You mean since that accident?" (or some other major event that might lead to going back to drinking)
Sara: "Yeah. *sigh* I hope she's all right. The last time something like that happened to her, you know what happened to her drinking."
Jarett: "How can I forget?! *pause* I should check up on her, just in case, y'know... she falls back into that habit."
It's not exactly perfect, but that's why you always need to revise. And understand the situation you are working with (or situations if you're adventurous). We don't even need to be told she's in the pub, but alluding to the fact that she might be there despite the fact that the group talked about avoiding pubs/not having reason to go into them should be enough to give the player a good enough hint that also builds up character history and a connection (whilst small and only informative) about Lily with the players and the other characters is created.
Another observation is the fact the NPCs are just not appropriately behaving. Mother knows its bedtime for her kid, but lets them still run around screaming "WOOOOOOO!" to you? Old Man whose existence is weird. "Come by tomorrow"? I'm sorry, why is the old man standing in the middle of that central area anyway. Remember, characters should exist because they have reason to, not to simply fill the void or add the illusion of people living there. It's getting dark, we don't expect to see too many people, especially ones with no purpose. The guard, however, is appropriate. He's a guard, and he's doing his job. That we can believe. Old Man and Mother/Kid? give them a reason to exist or send them home.