The idea of this encounter is too close to a similar encounter in TES V, and was likely taken from there
Bandits in Legion uniforms tolling travelers so close to Teyn doesn't make sense. Legionnaires from Teyn and Fort Ancylis actually patrol the roads close to their territory. This doesn't apply to the gang of Legion deserters they're from.
There are separate entries for each requirement you don't satisfy, and they have messageboxes
Factors' dialogue entries are filtered to T_Local_NoLore == 0, which violates and prohibits the vanilla standard that faction questgivers are nolore-ed.
Some dialogue entries are a remnant of Old TR, when the mainland EEC was a separate faction. I'm not going to delete them for now because the Bloodmoon EEC is also different from normal Morrowind factions
During the OE Legion quest you are tasked to investigate the case of general Casik.
You are to talk with the administrator of the ministry of Justice, a woman in the central offices of the Curia.
She's supposed to give you a note granting access to IL dungeons and to Casik.
In my playthrough she never gave it to me, instead the topic Casik had her reply what sound like 2nd time answer : "As I already told you, you should .."
Varzan and Arvena don’t have NoLore. Varzan’s greeting when he meets Arvena doesn’t have a Goodbye. Arvena confiscates the sword from you without giving you a choice.