It is indeed a bug. you'll need to reload from an earlier save to do anything. Don't wory though he's not very important.
First make sure you have the Key off Howe's body before doing anything, then highlight the door and click it. That should start the conversation.
FYI, there are very good reasons to knife the sick bastard right there and then. For more info see City Elf origins or the spoiler below.
SPOILER During the City Elf origins he rapes your Cousin and murders your wife/husband to be. SPOILER