In D2:ED I turned in hearts after accepting Richard's second quest (after the first couple I started saving them to turn in all at once). In DKS I turned in all the hearts before using the speech option about that quest, since I planned to refuse it.
Level 7 sounds about right for the meeting with Talana (I went up to level 7 after killing a couple opponents in the dragon sequence). In DKS quest experience was increased and other balancing changes made to make levelling a little faster at the beginning of the game; I hit level 7 a little after the encounter with Talana, but with lots of quests left to turn in (so I could have been a couple levels higher).
For Lovis' Loot, you can either use the scrying stone yourself, or bring it back to the priest unused. Both result in the door at the bottom of Lovis' tower being unlocked. If your problem was with one of the solutions, maybe the other would have worked.
