Grey Sleeper was pulled out by Pallegina. I zoned into Cilant Lis with the Engwithan machine and was unable to progress the quest.
However, saving and reloading in that location resolved the problem for some damned reason. In fact, reloading any of the prior saves has resulted in this working.
What happens is that clicking on the blue highlighted area does literally nothing instead of opening a dialog option. I suspect that this is reproduceable by picking up Grey Sleeper and then getting to Cilant Lis without reloading at all, but I don't have any saves from before obtaining this sword to test with. All saves that I load into AFTER the sword was pulled allow me to complete it despite having gone to Cilant Lis multiple times without being able to click on the blue highlight on the Engwithan machine to initiate dialogue for the second verse.
