I found the blasted area where the Fire Elemental Lord lives, and a quest was given to kill him before I could reclaim the land.  At that stage of the game, the HP of his stack was 788, and all of it was in fire based creatures, making my Fire Mage Sovereign useless to attack it ( despite the fact that at level 5 he wouldn't have lasted long enough to do much damage even if Fireball would hurt the creatures).  I knocked off a few minor trolls and single fire snakes before leaving and trying to expand in other areas.

Several turns later, here comes the Fire Lord and his "Deadly" army strolling through my nation.  I started pumping out "cold" mages and troops equipped with cold spears, hoping to kill some of the smaller parts of the army, but it would many turns before I would have even a starting force of 5 or 6 units that I could pair with a champion that had the escape spell.  I watched as the army walked past several of my outposts and shards, heading straight for my nearest city .... and then kept going.

The Fire Lord and his army pimp walked around my territory from one end to the other (I'm estimating a good 25-30 squares in one direction from his start point), using my road system and passing by my capitol and several other cities until it came up against a mountain, and then stopped.  In the mean time, I sent my leader, his melee champions and some cold mages into the blasted lands to knock off the fire mobs (and a single dragon) and get some prime loot, in particular, the spawn spot for the Fire Lord.  I was doing quite nicely, but then I noticed that the Fire Lord had started walking back across my kingdom, back towards his start location.  After I cleared the dragon, I moved onto the Fire Lords spawn spot and ... nuthin.  No Loot, no event text, zip zilch nada.

Well, there was one reaction, the Fire Lords army was adjacent to a small city about halfway through my kingdom, and he decided to finally attack it.  For the heck of it, I decided to watch the slaughter and sat back to watch as the militia and two older spear units faced off against the Fire Army.  As the battle started, I didn't see the massive Fire Lord, just his minions.  His minions quickly finished of the troops, and in the end screen, I noticed a dead figure on the Fire Lords side.  The Fire Lord himself had died, though he hadn't even made it to the battle.  The army itself showed nine units after the battle and destruction of my city, making me think that there might have been more units in his army than nine, and that caused his "suicide".  The animation clearly showed his giant sized figure dying on the strategic map.  In any case, the army was stuck there after that, saddened by their Lords death no doubt.  I marched my "fire" proofed army back to take them out at my leisure many turns later,

Of course the quest won't go away now, even though I have cleared out all the monster lairs in that area.  There is a shard there that requires you to build a monument on it, but since the ZOC of the Fire Lord won't go away, I can't build an outpost near it to build a monument. 

So I posted this for the developers, to help them figure out whether the quest broke itself, or whether I did something odd enough to break it myself.  I don't have a dropbox account, but I would be happy to send a savegame in if you guys need one.