I have almost the same issue with my phyical 360 copy.
Right after the combat training, the elves attack. I get the health potion. I defend and then attack.
When I defeat the first elf, he drops his weapons and is on his hands and knees before me.
The animation continues, but I cannot attack or do anything other than bring up the game menu up.... And from there I can go to the main menu...
I did delete my save information and I started the game again...And I ran into this same glitch....
I figure I just have to wait for the next patch...but if there is anything else I can do.