I think this is leftover from the originally planned content that has not made it into the game. As if originally the engine was meant to be fixed either
in the upper city, steel watch foundry or with the enhanced infernal iron you get from some steel watchers
I would see this as an oversight rather than a true effort to be misleading or that Dammon did not weigh his words.
he literally after the 2nd upgrade says that this is not a cure and to find him later. Meanwhile a steel watcher tells Karlach her engine uses obsolete technology and you later find the literal inventors of said technology.
I know it is nitpicky, but I also think this is a good thing to bring up especially as larian is listening and implementing changes each update. Cure is definitely not the word to use.
