Possibility to kill the madman theself

The Werewolf can be killed using detailed knowledge about werewolves.

There is a book called "Beast's clothes" which will teach a lot about werewolves and the weaknesses they have.

The book will add a beastiary entry containing information on which signs, bombs, oils and strategies to use. I don't want to spoil your experience here, so I will let you find the book (for me it was in a chest in a bandit camp, seemed random). If you don't wanna find it yourself, I will add a spoiler area at the bottom of this post.

I just managed to defeat it yesterday after doubting that it was even possible.

Werewolf weaknesses (Spoiler):

Oil: Cursed Oil
Bombs: Moondust, Devil's Puffball
Signs: Igni

You should be aware of the fact that he can summon other wolves to help him. Usually he only does this once. Also, preparing some potions like Swallow for Vitality regeneration or Thunderbolt for more damage will also help you in this fight. I managed to defeat the Werewolf at Level 5. My damage output was bigger than his ability to regenerate his health. Just keep the damage coming with the weapons and utilities mentioned above and don't forget to dodge his attacks.

They aren't meant to be killed. In the tutorial area they are there to be designed to teach you not to steal from people while guards are around. If they kill you you just wake up after a while and lose some money, you don't even have to reload a save.

If you kill them they simply "respawn" and go about their day.