I am almost positive its the key that he wants, and its broken. If this is the case can I be rewarded the item? As the key will be broken next time, and it was a bitch to get. Thanks.
First, you use the key to enter the room, then you're supposed to trade the key to the guy. Problem is, you can't trade used items, so you'd need two keys.
Second, the guy's inventory is set improperly. The item he's supposed to trade in return isn't in the spot it's supposed to be, which is why he returns the key to you.
Third, the item that IS set in his inventory doesn't exist. I'm going to have to dig through the backup files and see if I can figure out what he was supposed to trade.
I did find the crash bug for trading bad items, so that's been fixed. Keep the frozen key in your inventory - once I find what the item was supposed to be, I'll take the key from you and give you the item.