I think Jacob Busby's Supplemental Rules approached it very well.
Barbarians and Dwarves draw 1 from what's called a "Combat Deck" at the beginning of a quest. They can play them as a free action to give themselves a one time special advantage. Zargon also always draws the same number as the total the Heroes have, which helps his monsters.
After a certain amount of Quests, the Barbarian and Dwarf get to draw another Combat Card, and the Elf now receives 1, which means Zargon now draws 5 (which if you see whats in his evil Combat Deck is pretty crazy).
Furthermore, on your first "level up", you gain access to hiring one Henchman, and the number of Henchmen you can hire increases on each subsequent level up.
A later rank gives the Heroes access to the Potion Shop.
The very last rank, known as "Legendary", gives each Hero class a unique and powerful special ability.
Lastly, Zargon gets an extra monster each time the Heroes level up. The first level up only gives him an extra Goblin or Skeleton per Hero, but the extra monster he receives becomes increasingly more powerful in the later ranks.

