This is my second playthrough and yet again I can't find a way to trigger this quest, but I still get the bad ending.  Im standing in the Celestial Saplings talking to everyone and I see and yet nothing happens.  What am I doing wrong?

IIRC, it doesn't trigger until chapter 3?

How do you know what chapter your on? I can't see it listed anywhere.

IIRC, it doesn't trigger until chapter 3?

Isn't Twin Elm's chapter 3? or do you need to progress farther into it than just showing up?

Frightened villager in the inn in Twin Elms in the lower left central area. His name is frightened villager so I missed the quest on my first run through as well.

You could say that a chapter is one of the "story texts" that gets narrated 

You can also get the quest by talking to the statue in your keep - she has a few different little stories she tells you throughout the game, and one of them was a letter from Raedric challenging me to a duel - so I went there and slapped him with my leather gloves.