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I'm stuck on the dagger quest too. I have all of the items Will Turner asked for, but when I go see him, he says "Good, you're back, let's start again" and the little dialog box pops up saying I've finished the quest, but then it still says my quest is to see Will Turner. I also cannot drop this quest.
BTW, I'm at the same impass on the Doc Grog quest. I've started another pirate since I can go no further on this one.
Arrgh!
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