Alright, well first off the priest gets his spell off! He rolls to hit Azazel and does so. The spell he used is intestinal wreathe, reproduced below.
Intestinal Wreathe
Level 3
Magic Points 24
Discipline Earth
Range 500'
Area 1 target creature
Duration: 2^(level of caster) (so in this case, 8 rounds)
Effect: Your intestines come out of your ass and begin to strangle you. They don't go back in once the spell is over.
Azazel can't attack while he's engaged in wrestling. However, he's much stronger than the priest, and it's the caster's strength that determines how strong the target's guts are. Azazel manages to avoid having his windpipe crushed and breaks out of the wrestling. This ends the spell and his turn.
Alright, the last peasent defending the priest is able to parry your maul with his fucking dagger, because FATAL doesn't include any modifiers for weapons with different masses. However, he only has one attack and you have two, and your second one hits his right shoulder, killing him.
Magic clothing is dangerous to put on in FATAL. Oh, and you have really bad luck. The girdle that I randomly rolled is the Cursed Girdle of Gelation from page 725. You can try to take it off when you first put it on by rolling your Intuition vs TH 17. You got a 3d10 roll of 7, and a -3 modifier, so you don't take it off. Now you take 1d10 LP per turn as your veins turn to ice. This first turn, I rolled 10, so you lose 10 LP. You can no longer remove the belt, and are now a slave to it. Once you die, you still be alive, although I can't find any rules on how the dead regenerate LP, so I guess you'd technically have 0 LP (I'll research this and let you know.) You will be compelled to "Dramatically play god." You get to choose which god to impersonate. Since the Fatal supplement that describes the gods is only about 10 pages long and clearly very unfinished, feel free to just make one up.
Oh by the way, you're now totally immune to any form of fire, so it's not all bad.
Your attack instantly snaps his arm and kills him, but it also snaps the magic staff he was holding. Time for a roll on the random magical effects table! My 1d200 roll gives me 164. Everyone within 3d10 feet of the priest now gets a 1d10 bonus with the pewtersmithing skill! The book doesn't specify whether either of those rolls are made on a per person basis or if they're just made once for everyone, so in the intrests of sanity, I'll say that it's 23 feet and a +8 bonus. Everyone but Dynastia and Master Debater get this bonus.
And to answer your question, there are rules for suffocation: you take 1 LP of subdual (read: easily healed)
You miss and the peasent hits you in the torso for 1 LP of damage. Check your BPP.
We're in uncharted territory rules-wise here. You guys might have to pull him out.
The rest of the peasents realize that this is a fight that they can't win, and they begin to flee back to the town square where more townspeople are waiting and setting up a makeshift army to kill you guys. They could possibly have more casters too. The only peasent remaining can't move because a bugbear is stuck up his ass.
The pesent who was on fire has finished removing his clothes. He's now in just his underwear, but he's badly burned. He turns to run, but he's hurt, so he doesn't get away very fast.