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I am at 10.9 progress with Nel and don't know how to progress with her because the seer just says "see more events to progress." Do I need to interact with other characters, do something in spirit form or is it a random chance?

(+1)

You need to view more main story events.

thanks, I don't know how to gauge how further I got given the game's non-linearity, but I managed to meet Miriam and Grace. What do I do in the fight against the grey Cycloptopus in the marsh and where is Grace after her first encounter?

Also, and this is kinda dumb, but interacting with the demoness in the Forsaken Keep doesn't have any major drawbacks, right? I've been avoiding her like the plague out of fear of her quest derailing the game in some manner.