I was just able to finish that quest no problem, though I did get the quest after 1.05 was release so maybe it is bugged if you started it before?
Azo is off to the right and took me a while to find the door to his lab, but he was there.
When speaking with Iqali in the upper level of The Salty Mast
Conversation
Iqali- "These halls are beautiful but cold. Shall we warm them up?"
1: We Shall
2: Perhaps Latter
If you select "We Shall" The screen goes black as if transitioning, but never returns to the game. Though you can move around and select your party members.