This one is giving me real problems; it's very difficult to keep the dwarf alive and the demon once released just immediately starts battle and permanently possesses one of my characters unless I reduce their health to almost nothing too: I did manage to eventually chase it off but it just did exactly the same thing again so I'm guessing I'm missing an important step somewhere.
Mostly, though, the dialogue just reverts back to the usual "I know you're out there" over and over and nothing else happens: no amount of attacking and healing the dwarf seems to make any difference at that point.