This was very fun to play. You'll want to have the white sword before level 2. Level 3 is where the going can get tricky (blue wizzrobes), but there are no unfair (imo) fights - for instance, the room with two blue wizzrobes also contained a bubble, which prevented the wizzrobes from respawning. Without the blue ring, I found myself using bombs against blue wizzrobes (thankfully there's a bomb upgrade in level 3).
Note that level 3 contains goriyas, pols voice, and wizzrobes, so some NES-authenticity points get deducted for those enemy groups. For most of the remaining levels, there's lots of enemy mixing. For every quest competitor, this is going to be a delicate balance: on the one hand, less restrictive enemy groups provide a more diversified fighting experience; however, there are some quests that (imo) have managed to strike a good balance (BigJoe's and Nightmare's entries come to mind).
Some folks may feel that it's a pretty ballsy design choice to not give access to the blue ring until getting the bracelet in level 4 (nice touch to still have the bracelet under the armos btw). I sort of think/expect most of the people playing these quests can handle blue darknuts in their sleep, so level 4 is very do-able (I didn't have my first death until level 5). Whatever the winning entry is, it should (imo) be an appropriate sequel to the 3rd quest in terms of difficulty.
Pretty clever way to make the boomerang required to get the level 4 boss key. Later in the game the book is similarly required to progress (the room east of level 8's entrance).
As the old man says, level 5 basically requires the blue ring. Despite having the blue ring, the difficulty does pick up a bit here. You'll be fighting blue wizzrobes more regularly, with only a white sword. The pink stalfos with its triple swords is a nice touch (glad to not see folks not lazily slapping on the default stalfos-3 enemy). Having to dodge pols voice before getting the wand was fun. The appearance of firerobes and batrobes is starting to detract more NES-authenticity points at this point.
There are some questionable uses of keys within the dungeons. (Of course, it's possible to buy keys for 80 rupees, but I feel that should be used as a last resort; I understand if others feel differently.) Some of the optional items (longbow, blue boomerang) are hidden behind keyholes. In level 8, on the path to the super wand, there is a key behind the lock. In levels 5 and 9, the use of "life or money" rooms only lead to a small key (why not something more significant?)
In terms of difficulty, size, and secrets, levels 8 and 9 are great. The endgame of this quest is especially fun to play. The mirrorrobes in level 8 kicked my ass a few times, but after returning with a full potion, I was able to handle them (in level 8 the most we fight at a time is three, which is ok given only the blue ring...still tough though). In level 9 (nice overworld location btw), I found the passage to Ganon by accident (in the NE-most room, I think the statue is more sensitive to touch than the push-able blocks), but seeing that the statue faces the wrong way should be a sufficient hint, imo.
I admit that prior to starting this quest, your OP regarding the magic key piqued my curiosity - to that I say, bravo - I don't think I've seen any other quest competitor "require" the red candle in the way that you do ("require" in quotes since the key is indeed optional). A bit Armageddon-quest-ish imo, but it seems that several entries are getting clever with some features in level 9 (this is going to be the last "N-th quest", so that seems ok by me).
Overall, in terms of the contest, I think this quest falls in the middle of the pack relative to the other competitors that I've played so far (and I admit to some selection bias in which quests I've avoided, so you're technically higher than the middle of the pack). The difficulty is appropriate, and the quest's pacing is well done. However, keeping the contest in mind, I think there exists too much deviation from Zelda 1 (enemy groups, too many new items, batrobes + firerobes + mirrorrobes, block puzzles within dungeons, the bright blue & pink blocks in dungeons). That said, it's still a fun quest to play even without considering its status as a 5th quest competitor. Cheers.