decided to replay this game recently. btw two random questions:
1. do the boss portraits do anything?
2. are there meant to be duplicate doors in the door room?
he didn't drop nothing because you had no health
how the gnome (calling him a gnome now due to mention of the other name possibly being a slur) works is that if you click on him he will teleport to a random unrevealed empty space, unless there are no unrevealed empty spaces, in which case he will give you his XP (think of him like a reward for clearing every empty space)
so what actually happened is that he just teleported somewhere else