Well...there IS a volcano mentioned in the source, but the general consensus was that it was an early element of the game replaced by the Tower of Eternal Flames.
Also, I remember seeing the ultimate endings in the source (the descriptions, that is; you can read those by opening adom.exe in Notepad), but nothing like what you've mentioned. I'm guessing that he was just pulling your leg.
As for the Red Rooster Inn, here's an excerpt from the source:
"You enter the Red Rooster Inn as the sun is just rising. Alganon, the innkeeper, welcomes you with great joy and honors you for helping the ancient dwarf. As a reward he grants you a long item wrapped in a sheet. He winks at you and mumbles "Ye know what'ta do with dat, don't ye?". Due to some urgent business Alganon then leaves."
It would seem that he's giving you and item, and not the other way around. I think this was another element of the game that was replaced, in this case by that guy you rescue.
Also intriguing is this line:
"You will need to find the red rooster at dawn. I have hidden it more effectively. I am sorry to disappoint you but you won't be able to find the Scroll of Omnipotence in this place."
So what is this Scroll of Omnipotence? I'm guessing that it was the original way to reach an ultimate ending, and was replaced later in the game. Here are some relevant messages:
"As you read the scroll you suddenly feel great power surging through your body. You feel invincible and your abilities are increased by enourmous amounts! Now you are a true champion of %s!" (%s is Order, Chaos, or Balance, I assume).
Or, if you fail:
"Immediately you realize that this was a big mistake as you are not prepared for the wave of power that suddenly floats your body. You are ripped to pieces almost instantly!"
Also interesting is this line, obtained by reading a certain scroll (not sure which one):
"The background depicts an elaborate red rooster. The scroll depicts a trident made from gleaming black steel."
But I don't know the significance of any of this. It sure is fun to speculate, though.