Holy schnike....I actually found the carpet by running around the game world. Hope this doesn't happen to anyone else!

You need to attach a clapper to it, and when you clap your hands, it makes a twip-twip sound. Just follow the sound!
Actually, that would be kinda nice! As far as I know, you just gotta remember where you parked the durn thing!

I think I actually did lose my carpet. I flew into the small Island where the Test of Love takes place. Finished the test of love and the moongate on the Isle of Fire no longer takes me there. :( Maybe I'll have to use the Trinsic Roof cheat after all to get another carpet - thoughts??

I'm probably not the best person to take advice from when it comes to this game. However, since Jhelom is on an island, and I was in that area when I lost my magic carpet, I ran around the island until I found it. It was just sitting there, so I imagine your carpet is where you left it, and will probably remain there. Maybe you could take a boat to that island and walk around looking for it. Its pretty tedious, so if you can cheat to get a carpet, you might want to do that, if possible.

@ andrew281 - You can get the cheat console working, but you need to create a .bat file to do it. I did it Wednesday night. Here's how I did it.

1. Open the Command Prompt window, then type EDIT. This opens the DOS editor.

2. Type the following: ULTIMA7 ABCD<alt+255 from the numeric keypad>
If you did the alt+255 correctly you will see a space appear. You can't get the alt+255 to work in any other editor except the DOS editor, so don't bother with Notepad.

3. Save this file in your game directory as (something).bat. Keep the name at eight or less characters. I saved mine as U7A.bat. You can save it elsewhere, just remember to move it to the game directory.

4. Change your game's DOSBox .conf file to activate the .bat file instead of the .exe.

5. When you enter a game, the F2 will bring up the Debug Menu, F3 will bring up the Teleport Map. Hit F2, then [T]eleport Menu, [H]exidecimal Coordinates, then enter the coordinates 9a6, 6B0, 0. You should now be near the stone golems of the Love test. The teleporter to the Stone of Castambre still works.

The same can be done for Serpent Isle, but Notepad can be used instead of the DOS editor. The .bat file contents will be: SERPENT PASS

Hope this helps.

haha lucky, that carpet is paradise. I remember playing this game as a kid just roaming around mountain despise was it? And saw this carpet, i was in total shock... ah memories (just bought the game cant wait to start it all over)