The Telescope
 

Brona Frugrin in Steamfont Mountains will not complete The Telescope quest. When handed the Evil Eye Lens Brona just eats the item and does not reward you with the Staff of the Observers.

I just tested this quest, and it appears to be working correctly. Where did you obtain the lens from?

EDIT: Ok, it took me a while to figure this one out. I tried the hand in a few times, and there were no problems. I tried it again 5 minutes later and it stopped working. WTF? It turns out that Brona Frugrin has an enchanter pet right in front of her, but due to the current pet weapon bug, you can't see the pet holding weapons, thus you can't see the pet. You end up handing the lens to the pet instead of to Brona and you probably didn't even realize it!

That was exactly it. Thank you!