Believe in your sylph... Story quest somewhat bugged.
My wife and I were playing coop both on Win7 64b,
When we got to stand and type /lookout to triger the cutscene during the mission, we both went next to the flashing spot and did the emote.
It worked for me, but not for her, she was just doing the emote but the cutscene would not trigger. She tried about 20 or so times, moving slightly every time, disbanding the party all did nothing... Eventually (perhaps after walking through the blinking light) it worked out and we were able to keep going...
I have seen reports of others having the same issue in many area online yet no fix suggestion...