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I completely agree with you; of course, it would be nice to have a decent storyline as well, but it's difficult to achieve this in Heroes (especially in the non-WOG versions), as it is, after all, a strategy game. Therefore, I tried to find a middle ground between strategy and storyline. I'm still planning to work on the storyline, but I don't intend to direct it solely in one direction, based on the book, because player freedom is a key feature of strategy games, unlike action games, racing games, and so on.
Regarding vampires, demons, and other creatures, I also agree with you. But on the other hand, I initially placed only creatures related to Lord of the Rings on this map. It turned out to be quite boring, constantly fighting the same goblins and orcs. Besides, the castles placed on the map also have creatures that are not related to Tolkien's saga (griffins, cyclops, centaurs, unicorns, etc.), and it's impossible to control this. Unless I made some creature generators in the castle unavailable, which would disrupt the map's balance.
Regarding Anduin, I'm not thrilled with it myself; even a minimal strip of water takes up 2 cells in width, which looked unattractive in the overall scale of the map (each cell of mountains, rivers, city entrances, and large forest boundaries corresponds to a map of Middle-earth).
As for your map: the thing is, when I talked to Gandalf, Bilbo (I assume he's the hobbit standing nearby) just ran off somewhere to the southeast. I also went into the city itself and several houses nearby, but nothing happened.