I've been trying to do this quest the past few days, but it never completes.
I enter the halls, find Iskalder among the many sleeping people, take him to the bone witch, upon which he disappears. So far I must've done it twenty times, and people still say it's possible.
Although a QA member would probably be able to give a more accurate response, the quest does seem to have a few upvotes on the Bugtracker so I suspect it might be bugged.