Yes, it’s intended that silence stops characters speaking which makes sense, and it’s fun to find places the spell can be used to good effect, as with stopping Gut calling for help and the broken wall up top of the shattered sanctum if you want to smash it without waking the drunken bugbears. It’s fantastic that Larian seem to be actively making sure stuff like this works: those two examples didn’t in the first patch I tried them in but were fixed later.
But yes, it can potentially cause problems with scripted dialogue. At least when someone in our party casts the spell we can just stop it, but in patch 9 I had a problem with a
duergar cleric in Grymforge casting silence and preventing the quest there from progressing. In that case, the scripted dialogue didn’t trigger even after the silence spell ended, I assume because the game had updated some variable or other indicating the dialogue had happened. Sounds as though there might be a similar issue with your Ethel save.