In addition to the above I would use Incite Riot (PHII) Force everyone attack the closest person to them. Despite the spell lasting for 1 round, the aftermath would probably last long enough for you to start throwing around plenty of other compulsion effects and causing general havoc.

Option B: The wizard could just put the town under siege. Teleport in (disguised of course) thrown down plenty of "landmines" (any kind of blast spell enhanced with Earthbound Spell (PHII) to create plenty of traps, daily.) Explosive Runes cast on something people are likely to read carefully, like bulletin boards and the like. Cause sickness and pestilence to spread through the town, create "healing" potions but actually make disintegrate or poison potions to cause more woe. Finally, cut off food supplies and retreat, make them captive in their own homes. Lastly, prepare a few divination spells so you can watch everything unfold, and find new victims. Do this with similar spells and effects until the entire town is paranoid of everything, without ever discovering who did it or why. Actually, that seems a little sadistic.