Caed Nua is basically a haunted mansion that you can upgrade and brag about, the system is simple enough that you will end the game with a really good Stronghold, but, perhaps, you will not do this optimally, so I'll list the order of upgrades that I think are the best to get first.

1 - Eastern Barbican, this is the only mandatory upgrade.

2 - Brighthollow Restoration, it's a nice idea to be able to sleep on your own house.

3 - Main Keep, it looks good and you need it to unlock other upgrades.

4 - Merchant Stalls, get this as soon as possible, this upgrade will unlock the merchant Azzuro that visits you with some really good items.

5 - Western Barbican, in order to unlock more upgrades and to balance your prestige and defence.

6 - Bailey, to unlock more upgrades.

7 - Curio Shop, it will give you a free creature part - that are used for recipes - every stronghold turn - which is every time you complete a quest. I used this a lot on my playthrought and sometimes you will even receive rare creature parts.

8 - Botanical Garden, free herbs for every stronghold turn - Edér, Hiravias and Zahua will apreciate this.

9 - Barracks, it will make possible to buy the services of mercenaries - that can help you defend your stronghold against assaults - and will also give you a nice bonus towards security. You can leave this for number 10 if you are playing on an easier difficulty.

10 - Warden's lodge, try to get this upgrade when you hit level 7 to 10 - that depends on the difficulty you are playing and your skills as a player - because the bounties can be quite hard, but they will give you some of the best items in the game.

11 - After number 10 you should have 11 prestige and 11 security, the brighthollow upgrades are all cosmetics, so they are optional, but I don't think it's respectful for a watcher to live in a place with rats and spiders, so try to grab one or two of them before advancing on the list.

12 - You should be at level 8 or even more, the game will start to get difficult, specially if you are about to go to WM I, so make sure to get at least one of the buildings that gives you attributes bonuses. Chapel grants you bonus towards resolve, Forum to intellect, Training Grounds to might and the Towers - my favourite because your companions can lack perception on harder difficuties - gives you a nice bonus towards security, prestige and perception.

13 - The rest of the upgrades will not give you any meaningful advantages, just some minor bonuses, so try to grab anything that you are lacking, e.g.: if your party is lacking stealth you can acquire the Hedge Maze.

14 - The Dungeons really don't make any difference, so leave this for the last upgrade.

Hirelings:

They are basically guards that will help you with invasions and one amazing quest - "The Battle of Yenwood Field" -, they are important if you are playing for the first time on PotD - and ocassionaly on hard - so don't underestimate their importance, now, I'll list some really good hirelings and how to get them:

Korgrak: despite the prestige downgrade he is the best Hireling you can get, he gives you -6 prestige and +6 defence, he will do tremendous damage and tank a lot of hits and ocassionaly help with special guests. Make sure to hire him on the quest "A Farmer's Plight".

Crucible Knight: they will only be available if you side with the Crucible Knights - of course -, they give you +4 prestige and +2 security, on a real fight they will not help a lot but they can tank some hits.

Glanfathan Soul Hunter: this one is a special guest, make sure to hire him when he arrives, he can do some good damage and gives you +2 prestige and +3 security.

Aedyran Noblewoman: make sure to hire her, I know she can be a little expensive on the beggining of the game but on the mid to end game you will not even notice her wage, she gives you a tremendous +6 on prestige, but she will not fight alongside you.

Dunryd Psion: he gives you -2 prestige and +2 security his damage will make you happy that you hired him despite the - 2 prestige.

Addendum: except for Korgrak and Crucible Knight - because both are from quests -, the hirelings will eventually appear or reappear on your stronghold, even if they die or if you dismiss them.

Curiosities:

1 - You can actually use the dungeons to hold prisioners. Some NPCs encounters will have this option in the dialogue. After the imprisonment, if the prisoner didn't manage to escape, someone will eventually offer you some money for the NPC.

2 - There are no confirmation if security or prestige impacts the amount of attacks that your stronghold receives or the amount of gold you lose to bandits.

Stronghold Quests:

They are quite simple, you just send a custom adventurer or companion on a mission that will take stronghold turns to complete - more turns to complete = better spoils. After dispatching your chosen hero don't preoccupy yourself, they will always succeed, just stay alert towards whom you send in said missions, if you send someone that you use often, be advised that you will not be able to use that person for a while, so that is why I reccomend the usage of custom mercenaries - the ones that you can create at the inns - in said missions. For example: if you send Edér and now you have a boss to defeat, who will tank?

Advices:

1 - There are some really good loot from stronghold quests. That is why I recommend upgrading your stronghold.

2 - "The Battle of Yenwood Field" is a great quest but can be a little difficult, so make sure to have plenty of good hirelings before dispatching your army. One tip: complete WM II before starting this quest.

3 - The Adra Dragon, sadly, will not give you any prestige or security.

4 - Don't worry about the money, you will have plenty of it after you reach level 10.

5 - Punch Lord Gathbin.