They must have changed that, when I played through (I think on patch 6 at the time) it just stayed there forever as an unfinished quest, as far as I can remember.
I think if I were designing it I'd let you find the wand, then talk to her and have a deception check to say you didn't find anything. Or maybe a persuasion check to say she shouldn't trust the hag. Then that could complete the quest