tactics
spell choice
These spells are worth considering:
fireball
wolf - to gain mana
get the mana flowing
Head left and plant a wolf on the PoP you find.
From there, head due south (not through the village) and over the bridge, and take control of the next PoP with another wolf.
Only now should you approach the village from the south, and plant another wolf on the middle PoP.
Now you've got mana flowing, and are ready for the goblin king.
prepare for balor
Plant a wolf by the west channel where the goblin king will emerge from [2].
As soon as you speak to the village elder [1], watch the scanner map.
You'll see a pink cross appear (the location of the goblin king).
Now (making sure that Gaion is following you) head straight towards the goblin king.
When you find him, fire as many fireballs at him as possible.
Assuming your aim is good, you should be able to almost kill him.
finishing up
When he is heavily injured, Balor will teleport away.
When he leaves, go back to the village hall, and collect the cloak of invisibility [3],
then leave the map via the portal.