I think the reason why everyone tells the gargoyle priest was killed by an arrow is a major cover-up by Lord British. Proof:
Historically Iolo’s weapon is the crossbow. He actually invented the triple crossbow! Yet no crossbows in Ascension, not even for the old bard. Logically we should assume crossbows, as lockpicks, have been outlawed in Britannia (me thinks the old king is getting a bit of a control freak).
However this does not explain why mentions to bolts and crossbows have been replaced by bows and arrows. My guess is unlike lockpicks people wouldn’t like the fair ruler of the lands take away their weapon of choice idly, so he set out a campaign to downsize the role of crossbows in history, most notably the fact that one had once saved the Avatar.
Now why did Iolo go along with this cherade you may ask, after all this has put him out of business. Well, maybe the most elderly Iolo has gone senile, and Lord British convinced him that crossbows were but a trick of his mind, or more sinister yet, he has been paid off by the king to keep quiet. (His brand new house east of Britain is most suspect, a “gift” by Lord British perhaps...?)