I've had trouble with this quest on a couple characters. One of them brought an item that matches the description and got no response. I decided to start a new character and see if, for example, the NPC started talking to me but I missed it.
Code:
> empire
A trust fund has been established in your name.
The Kytar Barracks
You are in the recruits' latrine of the Kytar Barracks. There is a
wash basin here, for cleaning off the sweat and grime of a hard day's
training, and a sheet of silvered glass, if you need to shave. Behind
you is a stack of chamber pots. Prepare yourself well, but don't linger too
long here. Your drill instructors are waiting and they HATE to be kept
waiting.
Obvious exits: s
There are some graffiti notes scribbled on one of the walls.
You have discovered Kytar University!
You gain some worthwhile experience.
-----snip walking to shop-----
Merchant Road East
This wide road rests smothered by the shadow of towering stone buildings.
The cold and uninviting granite blocks of this road rest seamlessly
together, smooth and undecorated. Absent merchant carts crowd this road's
edge, the hushed and solemn path reminiscent of a military parade road held
in order and waiting. Windows and doorways are decorated boldly and
brightly with advertisements, breaking the monotony of one cold stone
building after another. The chain-hung signs above the doors, while waving
their owner's craft proudly, are similarly condemned to nothing but a
muffled whisper.
It's raining lightly, mild, and there is a gale blowing.
Obvious exits: n s w(closed)
[HP:100%] [ME: 71%] [PE: 71%]
> open w
look w
You open the door.
[HP:100%] [ME: 71%] [PE: 71%]
> The door is open.
You see Lady Cecilia's Lutes & Harps.
A well-dressed human and a comely female half-elf are nearby west from here.
[HP:100%] [ME: 71%] [PE: 71%]
> w
You walk west.
Lady Cecilia's Lutes & Harps
This cozy shop has several nice wooden display shelves. There are also
several nice displays on the floor of the store. There are numerous
stringed intstruments in the store for sale. The counter in the back has
several sheets of music, left scattered, perhaps by the shopkeeper.
Obvious exits: e
A well-dressed male human is here.
A comely female half-elf is here.
[HP:100%] [ME: 71%] [PE: 69%]
> quest
Quests you are currently performing:
[ 1] Cecilia's Lute Menegroth
[ 2] Find the Drill Sergeant Kytar University
Completed Quests: [0/198]
[HP:100%] [ME: 71%] [PE: 69%]
> twiddle
You patiently twiddle your thumbs.
[HP:100%] [ME: 71%] [PE: 69%]
> quest 1
Quest summary:
Name: Cecilia's Lute
Level: Amateur to Veteran
Area: Menegroth
Description:
Pick up a lute for Cecilia.
[HP:100%] [ME: 71%] [PE: 69%]
> time
It is 9 o'clock pm, Day of Deception, Spring 9th, 1244 T.A.
Shattered Kingdoms started up at Sun Nov 11 22:00:27 2012
Current system time is Mon Nov 12 12:42:35 2012
[HP:100%] [ME: 79%] [PE:100%]
> l
Lady Cecilia's Lutes & Harps
This cozy shop has several nice wooden display shelves. There are also
several nice displays on the floor of the store. There are numerous
stringed intstruments in the store for sale. The counter in the back has
several sheets of music, left scattered, perhaps by the shopkeeper.
Obvious exits: e
A well-dressed male human is here.
A comely female half-elf is here.
[HP:100%] [ME: 79%] [PE:100%]
> l cecilia
This petite woman stands a little over five feet tall. She has black
hair, dark eyes, high cheek bones, and small, pointed ears. She has a
comely face, but is more cute than beautiful.
Overall, a comely female half-elf is in excellent condition.
A comely female half-elf is using:
<worn as armor> light chain mail (brand new)
[HP:100%] [ME: 79%] [PE:100%]
> time
It is 1 o'clock am, Day of Thunder, Spring 10th, 1244 T.A.
Shattered Kingdoms started up at Sun Nov 11 22:00:27 2012
Current system time is Mon Nov 12 12:46:43 2012
[HP:100%] [ME: 79%] [PE:100%]
As you can see the NPC did not speak in the course of four hours. There is no indication other than the quest log that a quest was initiated.