The Dink Network

The first time I was playing, I didn't find that house at first, so I wander around and found the key/pendant quite by accident...When I finally found the house and talked to the guy, he thanked me (I didn't even kill the goblin) and took me to the underground. I couldn't find the key to the locked house and was thinking that the key was on the other side of the fence (near the slayers)so I played it again and did things "right" this second time, and got the same error as you did...
I don't know what is wrong, but try to get the key before going inside the house...