In version 1.0, Koly won easily. The reason is simple: he took Wisdom and learned the "Phantom" spell (which is often available in Elven cities). We attack Nicholas and, during the battle, the hero does nothing but create phantoms. In our case, phantoms :) 10,000 of Nicholas's skeletons destroy our entire army, but only the phantoms remain, and we have 300 Masters and several squads of phantoms. The stupid skeletons don't attack the Masters but destroy the phantoms. But the hero creates them faster. Result: a clear victory.
P.S. I don't know how it is in later versions. In 3.0, I suddenly discovered that I couldn't create more than one phantom. And, as I noticed, the AI doesn't pay as much attention to them as it used to... But in 1.0, it will definitely work ;)