"Ointment" is a substance that you rub on your body for healing, or medicinal, or beautifying purposes. (Like body lotion or body oil or certain types of salves.) It's usually nice, expensive things. Because they often smell nice, if you leave the jar of ointment open, flies get attracted to the smell and fall in the jars and die, which ruins your lovely ointment. "A fly in the ointment" is a small thing that ruins something really nice.

Ointment is a sticky substance used to calm and repair rough or damaged skin, so ointment is generally soothing, however, if a fly (insect) gets stuck in the sticky substance, it ruins the lovely ointment and it's no longer soothing to the skin, because there is a nasty insect stuck in it.

The only problem was that no tourist could be found anywhere, high or low, throughout the land. When we use fly in the ointment it means: everything is good except this one problem that ruins everything.

It means there's this one problem; suggesting that it would be all good except for this one little problem.