I had the same problem with my first playthrough. On my 2nd time around (created after patch 1.3.5) it worked fine. I'm not sure if patch 1.4.X will fix it for you or not, but at least it is not needed for any achievements and when you get high enough
in levels it becomes worthless anyways.
On a side note, on my 2nd playthrough, every time I used the phial and it refilled it would leave a 0.5 weight empty phial in my misc items. Now I have a full phial in my potions list and 3 empty phials in my misc items. When I transfered the phial to
a follower, all the empty ones transfered with the full one.
On a side note, I've read elsewhere that if you already have a briarheart in your inventory when doing this quest, it will glitch. Not sure if that is what happened to us or not, but agreed, I hope this patch fixes that and more.