So, I turned in the quest and paid the 100 coins for the papers, however it says I still failed and I didn't get the pass.

Is this a bug or intended? It's pretty frustrating that I gave up the gold and didn't get the pass.

It s fatal for game progress, i did as you, and now I can´t get to Novigrad, the merchant do not speak to me, after I failed in subquest, his relative die, i buyed pass for 100 crowns from him, but he gave me anything! I did rest of quest in zone and now I am stuck on it, it s critical game bug, which has to be repair