I tried Felogyr's like 5 different times, and I do remember at one try or anther seeing that note, but it must not have worked, because I tried the quest again, and again.
For my last (canonical?) try, I had already done the Iron Throne, and dealt with the Steel Watch as part of my "other adventures" step 5 (because I was doing everything else hoping a hotfix would land). So maybe if the Iron Throne quest is done, the note that would point the player there can't advance the Felogyr's quest? That's assuming that 1hp puny paper note survives the tinder-keg...
@Blackheifer, good point about the extra barrels in the basement. Maybe I re-try this again, now with EXTRA BARRELS OF FUN
...damned Banites, using paper for their evil notes, instead of like... fireproof githyanki rune-stones
