According to the Wizardry Archives manual, the siblings searched for and found the armor of the fabled "Knight of Diamonds". Together, they managed to defeat Davalpus, but the battle left the royal palace in ruins and the City of Llylgamyn cursed. Davalpus and Alavik vanished together with the Staff of Gnilda, an artefact that protected the city. Nothing more is said about Princess Margda in the manual, but it can be assumed that she took charge as the last remaining royal and called for the heroes of Wizardry I: Proving Grounds of the Mad Overlord to find the Staff of Gnilda and save Llylgamyn.
The Ultimate Wizardry Archives (Manual), p. 60.