Dwarf Liqour is required to recruit Gregory. Talk to him to find out that he requires some Dwarven liquor for a party in Gerald's honour. Head out to Earth Valley to pick some up (either from Oleg in the Dawnbay Diner if this is before the split, or the shelves on the right in the Vashtel Liquor Store if after). Return with it to Gregory and he'll join your friends list.