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The Supernal Dreamers performed a ritual on Muzgu that infused a Daedric spirit into his body. He's contained it for now, but it's gaining strength. If the spirit takes control of him, it will combine its powerful magic with his own. Many will die.
1. Collect Scroll of Dream Trapping
2. Use Scroll on Dreaming Cultist
3. Lead the Cultist to the Cave
4. Talk to Master Muzgu
5. Use Daedric Circle to Sacrifice Cultist
6. Use portal to Quagmire and slay the Daedric Spirit
7. Talk to Master Muzgu