…Stonehell was designed to be a classic, old-school dungeon crawl, so the difficulty of exploring and surviving it is going to be very much dependent on the way the party approaches it.The title of this post of course refers to the long-suffering author of Dragon Magazine and Kobold Quarterly’s rule advice columns “Sage Advice,” and “Ask The Kobold,” Ralph “Skip” Williams. It’s become a bit of a tradition to in my gaming group to come up with hypothetical questions to submit to those columns that would most likely drive Skip mad. The last such question I remember was “If a druid shape changes into the form of a horse, would he produce horse urine or human urine? We need a ruling on this to determine if this affects a test for steroid use before entering the druid in an annual fighting festival.”
I don't know your personal history of gaming (when you got started, what edition you're used to playing etc.) so if any of the following is stuff you already know, please excuse this advice. Stonehell is set up so that it's probably going to be a tough challenge for 1st level characters if they go in swords and spells a' flying and hope to kill everything they come across. In order to best meet the challenges of the dungeon, the party should be open to using their heads as much as their brawn.
One thing to remember is that many of the intelligent monsters down in Stonehell are not going to automatically attack the party on sight. I recommend highly that you use the Monster Reaction Table on p. 52 of the Labyrinth Lord rulebook when the party first meets the monsters, provided that the party doesn't attack them first. On a result of Neutral or Indifferent, the monsters might just warn the party off rather than attack. A result of Friendly might even indicate that the monsters are willing to reveal some information about the dungeon that may help the party in their explorations. Remember that characters with a high Charisma get a bonus to roles on the Reaction Table, so if the party has a character that’s particularly charming do the talking, they stand an even better chance of avoiding a conflict. If that character also speaks the monster's native language, I'd award another small bonus as well.
The kobolds, since you mentioned them, are an even more special case. I talked about them here so it's worth a re-read before running the dungeon, but to sum it up; the kobolds in Stonehell are used to being bossed around by others and adopt a servile attitude when encountering threatening parties of strange adventurers. I'd play them as very fawning and whimpering to the party, rather than attacking at first sight. Using the Monster Reaction Table I'd probably apply a -3 to any roll on that table even if there's no other modifiers for Charisma or what have you.
In the event that things go bad while talking, or the party attacks on sight, I'd also like to remind you about the rules for Morale on p. 56 of Labyrinth Lord. They're optional, but I strongly suggest them. A band of minor threats, like the kobolds, have a even chance of running away or surrendering as they do fighting the first time one of them dies and when they're down to 1/2 strength.
That being said, there are a few monsters lurking on the first level that have a good chance of eating the whole party should they stand and fight. The Giant Gecko Lizard and the random ghoul could easily tear through a party of 1st level adventurers, so they need to know that running away isn't always a bad thing.
With all this in mind, remember that, while I wrote the thing, Stonehell is really yours to do with as you wish. Feel free to trim down some of the monsters' numbers or add a few potions of healing or a magic-user's scroll with a couple of additional spells to the dungeon to help out the party if you feel they need it.
If this is your first time trying an "old school" dungeon, I recommend you (and your players if possible) take a look at Matt Finch's Quick Primer for Old School Gaming. It lays out things to keep in mind while playing in an old school style game and is quite helpful.
Sorry to be so long-winded in this response, but I hope it gives you a better idea about how Stonehell was designed and what to expect of it in actual play… I hope you and your group have a great time! Always remember that that is the primary goal.
Remember folks, “Rulings, not Rules!”