So you successfully scryed for the dwarven council member and talked to him in the dwarven village?
Maybe try scrying again, and then talk to Eolus and go through whatever dialog options are available and see if that triggers a mine update.
What did the king have to say about the mine? Before getting the dwarven council member quest he says the miners are working on clearing the entrance.
Are you sure you are in the right place? You probably are, but here is a map of level 1
and screenshot of the entrance to level 2
If you can not get the entrance cleared, it is possible to bypass it: Teleporting Anywhere, via hex editor
Check your messages (click 'My Stuff' in the top menu bar, then 'Messages').