So I am pretty sure I completed this area, but the "Explore the area ahead for treasure and magical weapons" quest never seems to complete in my journal. I did the whole lighting of the boat, lowering the water level and going down the previously submerged passage and collecting everything down there. Anyone else have this issue?

I just left that area. I am quite sure that I received the completion notice for that crypt, but Caddoc would keep telling me we should check the Hot Head area for more loot whenever I would venture toward that crypt. I sure that there was nothing left to find, as I unlocked the Hot Head treasure, but it did make me wonder none the less as to whether I was missing something.

There's a lot more than the Hot Head treasure in that area. Go down the stairs, take a right and keep looking along the right wall.