Nope, still stuck. This is from the quest giver:
Pic edited with the temp. key items and quest window opened to show that I don't have the key item and the quest tracker shows the quest's name. Also you can see in the chatbox his current conversation text.
This is the one from the gully:
Shown here the dark miasma's text in the chatbox.
There's always a possibility that there's indeed something I'm missing (or using) however as far as my admittedly limited knowledge goes, and with GM's suggestion as posted in the original post, I still believe that this is a bug.
This is what I hope and that it will resolve itself. Until it resets, however, there's nothing comes to mind to fix it from my end.
Original post edited for extra clarity.