I can confirm. I have attempted this quest 4 times on my enchanter Brainfreeze. I went to Krofer and picked up the report. Then, I turned it in to Drioc and he gave me back the item to give back to Krofer. I went back to Krofer and handed it in, received back the item from him and the giants spawned. From there this is what I did:
1. Tried to immdiately hand in the quest item back to Krofer.
2 Tried to wait till the giants despawn.
3. I let the giants spawn, and then KILLED Krofer in attempt to reset him, returned after he respawned.
4. Had the spawned giants attack the village and then hand in the note to Krofer.
In all variations he ate my quest item.
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