I have no earlier save games and dont want to start a new game.

ah AWESOME I reloaded and the missing quest item was there.

It seems a simple reload is in order for missing memory items to actually appear.

maybe someone should stick this solution on UESP as its not so grave as it first seems.

You know, it's OK to fail a quest. The consequences are pretty slim (-2 rep, completion is +5). Don't reload your save or start a new character just because you failed a quest. Besides, you probably found some nice loot down there. Daggerfall is very much about playing through the consequences, and not just reloading to fix a little mistake.

Unless it's the main quest, in which case shame on you for not keeping a backup save file.

yes I fully agree with you, I have always adapted to consequences Ive made in all TES games.

Unfortunatly, this was the MQ and I succombed to the missing quest item glitch.