Heyo, so I actually took some time to do some trial and error to see what could be the cause TL:DR at the bottom.
So it seems the error is caused by a conflict of inventory items overall, the quest is for the tin bismuth pickaxe however I found that sometimes the trader doesn't know which one it is or which one to take. Obviously I'm not sure what the code is like for this in game action so I cant 100% say this is how it is for everyone. When submitting for the quest make sure you have your tin-bis pickaxe at full durability as well as make sure it is the ONLY pickaxe in your inventory at the time of the interaction. I did find that this interaction can get scuffed due to there being another pickaxe of any kind in your inventory, again, code, not sure, cant tell you why, it's a conflict.
The interaction will progress through all the stages and end at "giving you the map for the dungeon" and will get you stuck in an inf. loop of asking for a map. If this does happen i tried the check regen method mentioned with this post.
Amazing fire says "It did show up for me on all 1.21 made saves, but I did spawn it in on my 1.20 save with [/setstorystrucpos treasurehunter ~ ~ ~ yes] where I wanted it and then [/wgen delr 1]. Make sure you make a backup and do this far enough away, because this will delete and regenerate some chunks around where you are"
and Thorfinn responds with "If you do the radius 0, it should just respawn the one chunk you are in. Radius 1 used to regen both the chunk you are in, plus the 8 chunks bordering it."
Keep in mind that these actions while do work, will delete the chunk and everything, tamable creatures, and reload this chunk and the merchant.
These give you an in game soft reset to try the interaction again, do the chunk gen and then reload game.
TL:DR- Only have a single tin-bis pick in your inventory when doing this interaction.
Hope this helps.