No, you can collect the artifacts. I managed to do it once out of three attempts. Most likely, you missed something. Another possibility is that you sold one of the artifacts. In principle, completing the quest is not necessary at all; it's just a way to satisfy your ego.

Elves are indeed very strong. They have some of the best archers in the game. But the strength of the army in this mission is primarily due to Faidaen: he is already very powerful by this mission. With good development, the mission can be completed easily even on "Hero" difficulty (I also completed this mission using tips from "Gugolok"). Perhaps, this is my favorite adventure mission.