So I spent a lot of time doing the collectors quest, which had it's own difficulties fell asleep to level up after a few game days of exploring instead of leveling up I'm surprised with having a nightmare. That distracted me for a while. I finally get around to doing the secrets of the Ayleids now that I finished it I can't equip the crown.
Is this normal? I really wanted to use it cause I'm aiming for 60% reflect spell and damage effects for my character and I'm a bit wary about having to redo it all because my last save before I finished that quest was quite a while ago and I also found a mirror shield along the way I might lose if I have to reload so far back.

Repair it first,

First off if the game said you had a nightmare, check your active magic effects. I think you have Poryphic Hemophilia (aka Vampirism).

The second is a bug that the http://www.uesp.net/wiki/Oblivion:Secrets_of_the_Ayleids#Bugs mentions in that quest. You probably killed Umbacano before he could completely transform into the King of Nenalata. They suggest you put the items in Umbacano's body, then get them back from his corpse again. Then drop them on the ground and pick them back up. If that does not work leave the ruin completely, and then go back in to his body.