Like Kraydenvar said, killing Ethel will solve it. If you use basilisk oil before killing Ethel the poison is still active and the dwarf will die.
I am curious if anyone had tried it on the petrified drow in the UD, I was going to try but forgot where to get the oil or if it was a random lootable. (I assume they will still be hostile drow, bc they are even after spectator is killed)