I have a different problem in Madrana, if I try to visit the inn it tells me I need to report to the queen first but when I try to go to the Palace it says I must wait to be invited, which according to the guards at the inn say the Queen wants to see me right away...
In case you do not know what a Dullahan is the Headless Horseman is one of the most famous ones. Lust's head is no longer attached to her body.