Just start the game from the age after zhuge lians death and when you do xhoose asyour characters only the rulers (liu chan, sun xiu, and cao rui) the just make the other two to surender to any of the forces take the remaining empty areas and you wil be victorious!
To get the mode Rise of Heroes you need to complete the game once. If you do not feel like spending time on this do the following: Take the last year available from the game. Choose only 3 playable characters, the 3 rulers, liu chan, cao rui and sun xiu, then use one of those three to annex the remaining 2 and at the next council just attack on the empty areas and voila! game completed and you might get some extra events and items on the way who knows.. xJ
To add more characters to play as once the game has started hold L1+L2+R1+R2 then press Start and Select to bring up a screen to allow you to choose up to 8 playable characters
when bandits attack a city go to that city go to tower and select campagin agaisnt the bandits you will end up capturing a number of bandits 700-900 and they will join you if you fight there leader and win and hire him you get all the bandits all their supplys and all of there money