[loramin]

This is (sadly) working properly. The Citizens of Froststone faction was not raised by killing mobs until the Luclin era. The link you have to Allakhazam references that period, but if you go back and look at Allakhazam comments and old EQ sites (eg. using the Wayback Machine) you'll see that during the Velious era the only way to raise Froststone faction was to repeat the part of that one quest (the book turn-in in the Spirit of Garzicor quest IIRC).

Personally I do hope that someday when the devs implement custom content on Blue they will fix this, as otherwise the entire city is only relevant to a very small percentage of players ... but that's just a personal dream.