1. Allow the Elf and Wizard to learn new spell sets (like the ones in Wizards of Morcar, or Ethica's cool sets) without having to play all the way to Wizards of Morcar or the Elf Quest Pack.
2. Make more use of Mind Points.
3. Give the Talisman of Lore an actual point.
Some of the advancement systems I've seen are extremely impressive (e.g. Phoenix's Imperial Academy / Sorcerie), but they're a little too in-depth for me - I like my HQ at 'ages 10+' level

First some musings about magic in HeroQuest:
Spells seem to work in a Jack Vance 'Dying Earth' sort of way. Magicians memorise spells, and once they use one, it vanishes from their memory. This fits the 'discard a spell after use' rule. (Interestingly, this seems to differ from the way it works in the Warhammer Fantasy world--I believe that's based on the strength of the 'winds of magic', but I'm not too familiar with that game.)
Also, in Quests that involve the Heroes being captured and their equipment taken, the Elf and Wizard lose their spells. This suggests that their spellbooks have been stolen and they can't memorise any spell until they find the books again.
Suggestion #1: To learn new spell sets (like the ones in Wizards of Morcar), the players need to find spellbooks. One spellbook lets them choose that spell set instead of an elemental set. The spellbooks could be Quest Treasures (e.g. 'Spellbook: Darkness'). If they ever lose that spellbook (e.g. the Wizard gives it to the Elf), they lose the ability to memorise and use spells from it. Owning a spellbook doesn't increase the number of spell sets you can take, though--just the sets you can choose from. (You keep the same number of 'spell slots', in other words.)
....Now, in the EU questbook, the Mentor parchment text for Melar's Maze says that the Talisman of Lore was designed to increase the holder's understanding of magic. Since the Talisman's game effects are to increase your Mind Points, this suggests that Mind Points are related to magic in some way. (NOTE: In the EU game, the Talisman adds 2 MP.)
I took a look at the four Heroes' Mind Point stats:
Barbarian.......2 MP........No spell sets
Dwarf...........3 MP........No spell sets
Elf.............. 4 MP........One spell set
Wizard......... 6 MP....... Three spell sets
Filling in the gaps gives the following:
Barbarian.......2 MP........No spell sets
Dwarf...........3 MP........No spell sets
Elf.............. 4 MP........One spell set
?????.............5 MP........Two spell sets
Wizard......... 6 MP....... Three spell sets
?????.............7 MP........Four spell sets
?????.............8 MP........Five spell sets
And so on. There's a simple linear progression here.
Suggestion #2: A Hero's Mind Points determine how many spell sets they can take. The more Mind Points they have, the more magic they can use. Therefore, if anything in the game increases a Hero's maximum MP value, they can take more spell sets. (They get bonus 'spell slots').
This would make the Talisman of Lore extremely useful. It really would 'increase the holder's understanding of magic'. If the Elf or Wizard carried it, they could select bonus spell sets. The Elf could take three sets (MP 6), while the Wizard could take five (MP 8). These could be duplicates of existing spell sets--for instance, the Wizard could take two Fire sets, two Earth sets and one Water set--or they could be new spell sets like those from WoM if they've found the spellbooks for those.
But wait! you cry. What if the Barbarian or Dwarf held the Talisman? In that case, the Barbie would go up to MP4 and be able to take one spell set


...there's a simple way around this. Spellbooks. As noted above, it seems HeroQuest characters need to own spellbooks to memorise spells. We can assume the Elf and Wizard each own spellbooks for Air, Earth, Fire and Water (because they're stolen in some Quests). The Elf just can't memorise as many as the Wizard because his Mind Points aren't as high.
So even if the Barbarian or Dwarf held the Talisman, they couldn't take spells unless they also had a spellbook. Phew! Just to be on the safe side, you could rule that the Barbarian doesn't know how to read anyway, so wouldn't even know which way up to hold the book, let alone understand it...
On the other hand, this opens up possibilities for special spellbooks. As far as I know, Dwarfs in the Warhammer world don't use regular magic, but know special rune magic instead. Maybe there's room for a Quest Treasure spellbook that only a Dwarf with 5 MP or more can read, allowing him to inscribe weapons and armour with powerful enchanted runes?
Oh, and for EU players who want to use Chaos Spells: maybe the Mind value of monsters (at least the ones with names) determines how many Chaos Spells they get too.
Thoughts?