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I play the game on a OSX and when you return to lord british after killing the requested moster the screen reads PRINT " PRESS -SPACE- TO CONT.", but when you press space you return to the map and nothing changed at all. To complete the game you have to get the quest from lord british to kill the balrog, but before that you have to complete some quests and for every quest you get a small stats boost. So basically there is no way to finish the game or get stronger. All you can do is gather resources.
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F3I5T: I play the game on a OSX and when you return to lord british after killing the requested moster the screen reads PRINT " PRESS -SPACE- TO CONT.", but when you press space you return to the map and nothing changed at all. To complete the game you have to get the quest from lord british to kill the balrog, but before that you have to complete some quests and for every quest you get a small stats boost. So basically there is no way to finish the game or get stronger. All you can do is gather resources.
I had the same problem - also using OSX.

I killed the Balrog anyway using the magician's talisman, or whatever it was. That spell that has a chance of doubling your stats. Got that a few times then killed the Balrog and called that close enough.
Had the same problem under DOS. Does this help?