Is there a level or status requirement to get the quest from the Breton at Harm's Folly? He keeps referring me to the grave but as far as I can see I can do nothing there? It may be my level is too low but I'd like to know.

It's likely not your level. If I'm not mistaken, I did it when I was around level five. I've run into a similar, if not the same, problem with a quest. I had to talk to the man who owns the First Edition in the Imperial City, and it wouldn't let me talk to him about the subject.

Apparently the quest is bugged. I presume it will be fixed in the next patch.