Note: I'm really bad at the whole "persuade everyone to gang up on the apparent leader"-type games.
You are.
Like Dominion, the player who currently has the most victory points is not necessarily the player who has the best chance of winning at that point.
Watno's power of pain skill means that all of Watno's wounds give him +2 in whatever category he wants. That means as long as he doesn't draw them together, they are about as good as Improvisation. The negative VP associated with those wounds is worth it because they allow him to build his character and acquire other forms of VP. Furthermore, he can just wait until the very last round of the game and trash some or all of them.
Watno has an artifact, theorel does not. Artifacts are pretty powerful, you saw mine, it costs 0 mana to get Siege Attack 6 with only a 1/3 risk of getting wounded.
Watno has the highest fame, which means he's closest to the next level up, which means he's closer to upgrading his "engine" further.