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Edit: Due to misunderstandings, the Nameless island quest is not fully implemented yet, it is still going through testing and will likely be released in 2 days, along with mercenaries and .. something else. yup.
Make sure that Larjes DISAPPEARS outside of the house before you enter the dungeon! The same thing happened to me, so me and my friend came back to Larjes, spoke to him then he disappeared, came back to the books and i was able to investigate them.
When you exit out of the house (the warped one) make sure that Larjes speaks to you. He says something "What" This is the true nature of the island, etc...Then you go back to the moldy books.