I think you may actually have to have 100% of your troops filled. He said the same to me, I trekked back and filled them up, then returned and it worked. It's not too inconvenient if you're using a couple troops of reserve (with backups of troops you're using) and some dwarf troops native to the region.
For defeating your double the first time, I think you get 1 of each rune (I could be wrong; it's been a while). After that, there is a second challenge (I'm pretty sure you don't need full troops for this one because I just did them both back to back) where you fight a 'future' self who has an even stronger army, also made up of the unit types you've got employed at the time. As a reward for winning this second battle, you get 3 of each rune. Not bad.
This being the case, it's not a bad move to not use troops with abilities that are too powerful or that might swing the fight in your opponent's favor. The AI doesn't use the best spells available and doesn't have access to Rage Spirits, so that's going to be where your advantage really comes through. I'd make sure to have full mana and full rage (through potions / artifacts / a nearby fountain) before these fights.
I hope that helps.
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