Sorry, this is might be a paltry bug report. I didn't record enough of the details I probably should have.
I took a quest group through this yesterday and nothing spawned. There were 4 of us, all mid-level characters.
The area's other triggers and all seemed to work fine.
The text and "quest taking" features, as well as the "give up" text feature, all worked fine - although the NPC called the party "incests" instead of "insects" twice!
The journal entry was there, but blank title and blank entry. After the "give up" it remained in the "pending" quest log, not the "finished" quest log.
One player checked the final loot (not to take it, just for bug-test purposes!) and said that it also did not spawn correctly, although we were skittish about abuse and only checked 2 containers.
There was some indication around the place that another party had taken the quest already, so that may be part of the issue.
Hope that helps! Looks like a cool quest.