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Alternate path doesn't work. I've got the sword from Owen, picking any option once coming out results in the Magister initial a fight.
it's because youre not having the person who has the sword be the person whom they're initiating conversation with. make sure ONLY that one person comes up and it'll give the dialog to hand over the sword.
What's up with Owen's sword?
Make sure you break off whomever HAS the sword from the party and go back topside with ONLY that person to ensure the magisters talk to them specifically. If they talk to anyone else, you wont have the option to NOT fight them because you wont have the option to give them the sword.