It didn't kick our ass. It showed up, and for a few seconds everybody done lost their minds. But then:
- we stole all of its treasure
- without losing a single man
- withdrew to a place literally next door which it cannot follow
- and made it think one of our major enemies was to blame.
That is pretty much the 0e Dungeons & Dragons version of Flawless Victory. Short of urinating on it, I'm not sure what more we could have done.
EDIT:Oh, wait! I know! We could have
- Killed its high priest
- and desecrated its altar
And we did that, too. /EDIT
(Admittedly, Tavis ret-conned that we couldn't shovel the gold up as fast as we hoped - which I think is quite sensible - but for a few moments there we had completely and totally humiliated that thing. I am too polite to suggest we deserve XP for the encounter.)
Arnold has impersonated a god once or twice in his misfortunate career, and is a little offended that some iguana with a pituitary disorder would presume to practice the same deceit on him.
EDIT: By my recollection, the absolutely critical part of the escape plan - the Protection from Evil spell - was Greengoat's idea and he deserves credit for it.