If you included "an," your answer would be correct.
would the simple subject be village
Yes. The simple subject is "village."
No, the subject of the sentence "Beyond those distant mountains lies an ancient American Indian village" is not specifically "ancient American Indian village." The subject of the sentence is actually the noun phrase "an ancient American Indian village." This noun phrase includes the article "an," which is indefinite, and the adjective "ancient" describing the village. The complete subject in this sentence includes the entire noun phrase "an ancient American Indian village," which functions as the subject of the verb "lies."
