I'm getting this same exact issue (custom avatar, undead human). I looked into this after it seemed a little strange how his only two dialogue options were to ask him to leave the party or exit the conversation in Arx, and I'm a little reassured I'm not the only one with this problem. I did all his personal quests, affection at 100, etc. I've seen a video where someone managed to get his Arx dialogue, so it does look possible. Rolling back to earlier saves hasn't seemed to help.
It looks like it's probably a flag/dialogue branch misfiring somewhere. The dialogue that leads into it (his first and second line regarding Arx that lead into the romance followup discussion) pop up before he goes back to solely saying the first line after dismissing the conversation three times. Maybe that's where it's breaking for the rest of the game. Very strange.
I might try replaying with a different race combination or an origin character to see if it has anything to do with tags. I know the undead tag has a tendency to mess with plenty of dialogue at the moment, but it could be a separate thing entirely. Any reports on if this bug happens with normal races/origins or not too?
