I did this quest just last week and ran into the same issue as the OP. A bit of looking through the threads returned on a search for "call of flame" found:
https://www.project1999.com/forums/s...=call+of+flame post #3 in that thread (nilbog's post) gives the solution.
When Lily makes the wrong text response, saying "I'm sorry, I don't trust you with such a task." in response to "Who is Ganelorn Oast", simply proceed as if she had made the correct response and say "I'll take the letter". If you are a L50+ ranger she'll thank you and give you the letter and you can proceed.
The quest behaves correctly except for that one misplaced line of text (that's what Lily is supposed to say if you tell her "I'll take the letter" and you're not a ranger.)