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Where in the World is JVH? - October 2006 Contest

Can you figure out Where in the World Is JVH? Check out the picture below (click image to enlarge):

WITW Pic
For October, JVH chose this shot of market day in an ancient city on the Sceptred Isle.

CLUE:
It's a walled city and sits on the edge of two countries in this land of three.

CLUE:
It was famous as an armorer during the Middle Ages, selling swords and shields to whichever side was winning - and had the ready cash.

ADDITIONAL CLUE:
It is the capital of the "shire" which gave Alice's cat its name.

The October contest is now closed.