I'm having the same issue. I've tried every option on the screen. Nothing gets the game going. I can see the characters, etc. but the adventure never starts.
You need to select a town, 1-5.
That's what the # sign means.
And then hold Control down and select the letter of the character. Know that you should select the letter of more melee class characters first. Leaving magic and robber types 4, 5 or 6. but also understand in battle enemies can "surround" you. Your max party members is 6 in MM1. MM2 I would still advise 6, as you can always hire hirelings for 7 and 8 positions. Positions 1, 2, and 3, would recommend melee. 4 robber. 5 cleric. 6 sorcerer. Once experienced, you can change this all up.
Beginning of the game, or newly created characters, are in town 1. When you save, your party can be in one of the other towns (2-5)(including your hirelings, or newly saved/quest related hirelings that show up in one of those towns in Might and Magic 2).