The Stone Sheath - Bugged?
The same thing happens to me. I’ve tried it about 6 times including after reloading the whole game twice.
I just completed the quest using some pointers from others who’ve had the same problem. After picking up the sheath, head towards the shore west of the lake and drop it as close as you can to the waters edge without coming out of the water (pick a shallow area). Then, get out of the water, pick up the scabbard while you’re still in your ‘on land’ state then run along the path back to roughly the same spot you were standing when the quest started.