aaaah, did you sell Steelbeard's hat? That's the item you need from him. The latest patch made it impossible to sell, but you could have sold it before the patch.
If this is indeed the case then you'll have to remember where you sold it since you can always buy back whatever you sell. Or you might be able to cheat it into your inventory? Somebody recently posted an item list so I presume there's some way to spawn items into your inventory. --- Strange women lying in ponds distributing swords is no basis for a system of government.