That is indeed the game.
As a ref, it makes one reflect on the added difficulty of playing out the full "return journey". If a dungeon is just outside town, there's minimal risk in getting home. If a dungeon is a three day hike from town at full movement, it becomes a six day return trek at half movement. And, generally speaking, wilderness encounters pull no punches; dragons, balrogs, giants etc. are all on the table. Even orcs are bad news, cos you can get hundreds of them.
That you got 1 Gold Dragon and a dozen Elves was pretty lucky; that you got a neg reaction was unlucky. But the elves are not likely to kill you without cause. You might have tried to buy them off with treasure or intel... too late for that now.
the Elf Medium (MV 12", AC 9, HD 1, hp 1/1, AL N) great cloak, lantern
; spells: color spray; scrolls: sleep, sleep, charm person
Hirelings: Georges; torch