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I'm at chapter 7 in the room with the water dragon's body and and I can't continue. I kill the enemies that appear and the dialogue cutscene starts, it progresses as normal until I make my first dialogue choice, the water dragon replies and then the cutscene abruptly ends.

I know from YouTube playthroughs, online guides and from when I played this on Xbox that this cutscene is supposed to go on much longer, it's also readily apparent something is wrong as without this conversation playing out in its entirety it's impossible to continue the game any further. I've found a couple of instances of other people having this problem:

No matter how I approach this scenario it always ends the same, I've even completely reinstalled my game but it didn't help.

This is what's contained in my logs folder of my Jade Empire install:

D3D Error Log - Jade Empire
Compile Time: Jan 23 2007 12:55:19
Run Time: 10/05/2016 15:07
WinMain.cpp SET #3!!!
CExoFile(English\dialog.tlk): FAILED: The system cannot find the path specified.

CExoFile(dialogF.tlk): FAILED: The system cannot find the file specified.

Setting FullScreen Mode: 1920x1080xD3DFMT_X8R8G8B8xD3DFMT_D24S8x60Hz

Created HAL Device. Texture Mem = 220MB

WinMain.cpp SET #1!!!
CCampaign::LoadCampaignData - STARTED
Loaded Difficulty: 1
CCampaign::LoadCampaignData - FINISHED
Setting MRU SAVE: Save 111 - 27h 55min - level 25
Area:j08_throne RRS:J08_THRONE
ON_DEAD: Fading out Headless bodies!
ON_DEAD: Fading out Headless bodies!
Leave Kiosk on Potential Reboot - Shutdown

I'm really hoping someone knows how to fix this, it sucks being so close to the end and not being able to finish my first PC playthrough.
I'm getting the same problem.

I can't seem to find a solution other than to load a save far back enough that the bug hasn't hit you. Problem is, I have no idea where the bug came from, how to avoid it, or where it was.
I know this is a really old game but I still love it and want to continue. I don't think I could stand going back ten plus hours just to maybe not hit a game breaking bug.