Have you talk to Ulysses and given him a soda?
Becase once he mentions Steve, you should be able to enter Steve's place and he won't be there.
I'm sorry you have to deal with this issue.
Once Horace shows up shirtless, he shouldn't talk about the book again.
I'll try to see if I can reproduce this, so I can fix it.
My recommendation would be to start the chapter over if you have a save, because I don't think you could advance the story otherwise.