I know they polled a "rework SitW" in the last game poll in the summer, but I forget where it placed.
At this stage, I'd say leave the quest in game. It does, in a way, resolve part of the issue of "saving everyone from the sea slugs". But use a scene of dialogue to help the player/char understand how events really went down (that way lore hounds can get the "truth", and the other players can just spacebar thru it). This explains away the plot holes (think of it as a matter of perception. the way we think we see something go down is only part of the story. or .... you're too drunk to clearly know what's going on and your mind is tricked into believing things happened a certain way)
The player then gets to do 1 more quest to really finish off the sea slug threat.
Kinda burned out on Xau-Tak. Wouldn't be stunned if reviving the Slug Queen and using her (and thru her, the ability to control lots of people) would make for a far more effective means of getting in that the path The Ambassador took. But be nice to finish a quest series without some "divine intervention" be the cause of the problem. Can't we just finish it off like we used to? Through good old fashioned shooting/blasting/smashing/stabbing it do death.