Yeah, a bit of confusion here I reckon, sorry to do this. If you tell him it is party treasure ("We all own it...") then *nothing* will happen. However long you wait. You need to use the other option, something like "You can have it but don't kill anyone with it". And the conversation when you have to do this occurs straight after killing the lich. Then you wait for a few days and the quest starts. There is quite a lot of simply waiting around in this quest though, if I remember correctly. Basically it might be working even if you think you have missed your chance as it does take a quite some time to conclude.
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[img]\"http://img1.ranchoweb.com/images/sproutman/certwist.gif\" alt=\" - \" /><br /><br /><i>\"And the angels all pallid and wan,<br />Uprising, unveiling, affirm,<br />That the play is the tragedy, man,<br />And its hero the Conquerer Worm.\"</i><br /> - Edgar Allan Poe
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