It sounds like you have a busted dialogue string or corrupted global variable somewhere in the game: What that means is the conversation with Oswald won't trigger because the game is somehow not recognizing that all of the previous quests have been finished and that Oswald's dialogue string should be available. That either means that your friends character hasn't talked to the right people to set the trigger for Oswald's chapter ending dialogue to become available OR that the global variable that should open the dialogue is somehow corrupted. Try talking to the leaders both in Targos and the at the stockade just to make sure that there are no "open" dialogues. If that doesn't work, somebody with some infinity engine experience is going to need to help you on this one.
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