After 4 attempts have had to shelve this until it is fixed. Even if you don't abandon the quest and try again it eventually resets to reach the dreaming cave so unless someone knows a work around would recommend not doing this quest for the time being.
I have the same issue and also tried to abandon the quest and redoing it. Nothing helped so far.
I also filed a bug report and contacted costumer support. Their reply was:
"We are unable to advance you with our quest. I am very sorry for the inconvenience. Our best suggestion would be to submit a feedback ticket to the developers to see if they'll have any hotfixes/updates on this quest in the future."
I thought helping with a bugged zone questline would be something they should be able to help with. Is this normal for ESO?
i'm facing the same issue, i was about to post a thread on the forum but it seems i'm not the only one having this problem.
So yeah, basically after the quest objective "Defeat the Ayleids forces" we take the Argonian staff, and then, the NPC stole it from us.
At this point the quest objective is supposed to update to "Talk to Xukas", but instead it get stuck to "Defeat the Ayleids forces" - and nothing happen, character is being stuck in the "dream" status.
*I tried to abandon the quest, and redo it, doesn't change anything.
After I defeat the Ayleids I am told to take the staff. I take the staff and return to the dream room. When I first arrive in the dream room the the quest still says I should take the staff. Then Cassandra takes the staff and the quest reads Defeat the Ayleids. Just a continuing loop which I have repeated 5 times after quitting and restarting the quest.
Bump...same exact bug. Booted out of dream sequence, Cass takes staff, then am in room alone with no NPCs, am still reeling from the dream, and quest has not advanced. Nothing fixes it..3 times and still the same outcome. Bethesda needs to get on this since it seems to be a common bug.