Same situation here. I am in Defiance Bay and I realized that I haven't finished The Old Watcher quest.
I think this might have happened because when I killed Maerwald, the battle wasn't finished yet. One of Maerwald's summons, the Flame Blight was still alive (it was POTD and I didn't realize quickly this thing was immune to piercing).
So the battle continued. And I don't think I ever got the choices dialog. The one where I needed to decide what to do with Maerwald'
In any event, I am now stuck.
