It's not completely reproducible, but I have managed to make it happen twice (and not happen 4 times). From the save:
- talk to rake_chaser
- be interrupted by the dandy
- end up fighting the dandy, kill him
- talk to the rake again
- have a zombie be created, fight it
- repeat for at least 2 more zombies
- quickload that save
- BOOM
Note: I think that the dancy should be carrying something nicer than a rusty knife. The description says sabre, which wouldn't fit PST, but surely we could equip him with a stiletto?
I think that the dead duelist is too articulate for a zombie, and needs a new dialog for his zombie state.
Thanks very much for restoring this quest. Do you need any more information than what I provided?