Where is Golthag?

Solution 1:

The reference is just talk - he doesn't exist in game.

In the notes on this page of the Wiki it explains that her reference to Golthog is "just talk" and that he cannot be encountered. From the wiki (emphasis mine):

In her description of what you have to do in Stonekeep, Queen Blubamka makes a passing mention about the goblin leader, Golthog, being in Stonekeep. This is just talk and has nothing to do with your quest. You will not have to fight Golthog nor are you even able to encounter him.

Disclaimer: I haven't played much of Arena, but the UESP is a very reliable source for the games I have played.