I extremely strongly doubt that this strategy works on any difficulty other than Easiest (and maybe Easy). You're supposed to retreat with your army and invade the island again later, but I simply turn around and beat the enemy army right away. The biggest issue is getting rid of the priests (who convert your knights) and the archers. The archers move around a whole lot and constantly kite you, so it's tough to take them out while minimising losses.

Got very lucky and managed to have 4 surviving knights (-- my goal was to have 3). Having more than 4 knights in the end wouldn't really speed things up (since there's a lack of space), but better micro would still let you clear the army faster, before attacking the temple. AoE controls and the lack of time don't make such micro very feasible, though.