Just did a fast test (and with cheats too hehe) on hard with a second account and everything worked as intended for me.
Capturing all 7 villages allowed us to advance to Castle Age.
Defeating an opponent counted at the objective list, as intented.
The AI was aggressive and creating armies as intented on hard.
Paying 500g to purple completed the Elephant side quest.
Looking forward to try the mission together and see what the hell is wrong. Cheers!