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Some ideas on the lost elven cityby Ville Lähde
Here are some loose ideas on the Gondolin-style elven refuge. I proposed the Mengul mountains as one possible location, and started to think more about it.
The city might have been started by an elven lord of the Lothenar people, who was worried by the increasing influence of Idris worship in Denagoth. (This could take place some time before the rise of Landryn Teriak, the Shadowlord - look at Marco's and Shawn's excellent account of the history of Denagoth.) He may have received a vision from, or a visitation by a powerful being who told him that troubled times were to come for Lothenar, and that a refuge would be needed to continue their heritage. I propose that an ancient golden dragon would be a good candidate for the Patron. I'll give the reason to this in the following.
The elven lord couldn't convince the ruler of the Lothenar elves of the usefulness of such a mission. Perhaps the elves of the northern forests had lived so long in the midst of the patient pines and the resilient lichen, that sudden changes were even more unappealing to them than to their southern cousins. So, the elven lord gathered his followers and started on the quest for finding their refuge.
To make the hidden city a bit more like Gondolin, you might have the elven lord bump into a group of dwarves who were lured to the north by rumours of gold, and driven away from Glantri. The dream of the elven lord appealed to the dwarves, who were puzzled to find a group of elves who seemed to lack the traditional enmity between the Rockhomers and the Alfheimers. (Isolated from the southern countries, the northern elves had had little contact with the dwarves. The alien nature of the dwarves puzzled them, but they hadn't learned to hate them. - Perhaps the golden dragon even told the elven lord to "seek the council of the sons of stone".)
(Note: The dwarves would give the elves the ability to construct their mountain refuge, and give access to the Gondolinesque weapons. Of course in Silmarillion dwarves didn't have anything to do with Gondolin, but they are a good substitute for the craftiness of the noldor elves, who have no equivalent in Mystara.)
Eventually the elves and their dwarf allies will find the hidden valley promised by the dragon. In the following years they begin constructing the city. News of the devastation wrought by the followers of Idris, and the treachery of some Denagothian tribes in the great wars against the Essurians reach the city from time to time. They learn of the growing distrust between the humans and elves in Denagoth, and decide to close off their refuge.
In the following years the elven lord repeatedly receives visions from his patron, urging him to make preparations for a war that is sure to come. But used to the safe life in the haven, the lord pays no heed to the warnings.
This all will change when a human warrior reaches the hidden city, bypassing the magical wards constructed by elven mages. He calls himself Henadin, a descendant of the warleader who fought the armies of king Nebunar. His people have been enslaved by the Essurians. After slaying a warleader that had taken over his childhood village he was forced to flee. In a moment of desperation he was rescued by an ancient golden dragon who told him of his heritage and directed him to the forgotten grave of Henadin. There he found the sword and the shield of the long dead warleader. By the grave he received a vision of a hidden city of elven warriors.
When the new Henadin arrives in the hidden city, he is at first received with suspicion and taken prisoner. But the images in the sword and the shield, and the events described by the song sung by Henadin, remind some of the eldest elves of the days when Denagothian elves and humans fought side by side against the armies of Nebunar. The elven lord remembers the promises he gave to the ancient golden dragon, the promises he has broken...
Henadin receives training in the hidden elven city. Little by little the elven lord grows fond of his adoptee, and is reluctant to let him return to the outside world. But Henadin is convinced that this is necessary, and asks the lord to give him an elite unit of elves to fight against the Essurian overlords. The lord refuses.
The arrival of two golden dragons into the hidden city changes the situation. The dragons bring news of the growing power of Landryn Teriak, and remind the elven lord of his pledges to his patron. Reluctantly the lord allows some of his warriors to join Henadin on his quest.
As told elsewhere, the Henadin manages to raise an army of Denagothians against the Essurians, and the army is joined by the golden dragons. What these stories neglect to mention, that the battle over Drax Tallen was solved by the surprise attack of the elven warriors. The Essurians were no match to their magic, and dwarven armour and weapons. This neglect is not surprising, though. Even though the armies of Henadin drove away Landryn Teriak (who was nearly killed by one golden dragon during his escape) and ransacked Drax Tallen, the teaching of the Followers of Idris had born fruit among the Denagothians. Some tribes attacks the army from the rear, so their victory was followed by bitter treachery. The army was scattered like leaves in the wind. Henadin is mortally wounded. The remaining elven warriors rescue him from the traitors, but his sword and armour are left in Drax Tallen (see X11). Just before the elves reach the hidden city, Henadin dies and is buried in the mountains...
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The hidden city could be used during the Shadow Lord wars of X11. Landryn Teriak knows about the existence of the hidden city, but doesn't know its location. As told in X11 Landryn Teriak will destroy the elves of Lothenar during his rise in Gereth Minar. This might be a good time to place some adventures that involve the hidden city.