Despite the patch notes saying this quest is fixed retroactively, it seems to be only partially fixed.
My savegame is from 1.04 after killing Azo in self-defense, before going back upstairs. The previously bugged wichts, patients, and guards are now fixed, but if I go upstairs the upper floor is still hostile.
Savegame here: http://www.filedropper.com/20bb4368-0d0b-4dff-8d57-370c713cd240quicksave
See also: http://forums.obsidian.net/topic/78935-105-bug-the-man-who-waits/