I have 2 questions about Hemlock as an agent of the Dark Lord:

1. How should a Hero spend actions to attack Hemlock in an Inn? I assume the Hero needs one action to enter the Inn and one action to attack Hemlock. If the Hero fails at this attack, is he automatically moved to an adjacent location?

The Hero can enter the Inn only when attacking Hemlock when it is the Dragon's Location. To attack Hemlock, move into the Inn (1 Action) and spend 1 Action to attack. The player draws 1 Hero card to identify the type of attack that can be used against the Dragon and now must discard 3 Hero cards that match the color the of the Hero card drawn for the attack type. If all 3 cards are discarded, Hemlock is defeated. If not, the player discards as many cards as they have of this color (this is mandatory) and suffers 1 wound for each card they do not discard. Since the Agents are like the Generals, the hero is either A) moved to Monarch City when they suffer wounds in this battle, or B) Moved to the adjacent location from the inn - the location moved to is the decision of the hero's player.

2. Does Hemlock inflict damage of any matching color Hero Cards regardless of how they are obtained or just cards gained from listening to rumors at an Inn?

There is a misunderstanding here - you gain no cards from Rumors at the Inn when Hemlock is the Agent of the Dark Lord. The Inns are closed for business and the only time you can enter an Inn is when Hemlock is present and you are attacking the Dragon. You cannot do a Rumor action when you enter the Inn to attack since there is no one present - people tend to flee when a venomous dragon enters the location. You need to have built up your Hero Cards in advance.

To defeat Hemlock, you need a good range of cards, preferably 3 cards of 3 different colors as it is easy to lose a battle to this Agent.

Example: The player has 3 Green, 3 Red, 3 Blue, 1 Black and 1 Purple Hero cards in hand and decides to take on Hemlock in the nearby Inn. The player has enough Actions to move into the Inn and attack, so he does. To resolve the battle with Hemlock, the player draws a Hero Card to identify the type of attack that will work and now must discard 3 cards matching the color of the card drawn. In this example, the card drawn is Green. The player now discards the 3 Green Hero cards from their hand and defeats Hemlock, so the Dragon flies away and the Inns are now open. If Black had been drawn, the player would have discarded their 1 Black card, suffered 2 wounds, and forced to the location outside the Inn or moved immediately to Monarch City.

Hope this helps. And as a side note (and since my imagination is always expanding the story aspect of the game) I see the draw of the attack card from the Hero Deck as a type of attack. For me Red is a brutal frontal attack relying on strength more than weapon skill, Blue is speed attack where the hero is hitting and dodging the dragon's blows, Green is an ambush where the Hero uses his wits as well as his combat prowess, Black is a precision strike to the heart of the Dragon - a single deadly blow, and Purple is an attack aided by magic. Of course this attack type means nothing in the play of the game - only in the imagination of the player.

Thanks for defending the realm - Richard