I couldn't find the quest you are referring to quickly :( Posting the quest name or NPCs name that gave it would of helped alot.
You can find write-ups about quests, via searching the beastiary for the NPCs name, and it will list all the quests they give, generally.
From memory, (although I've never done the blue series, but I believe they're all the same), all the waterfall parts are updates at a certain point near the waterfall. One of them requires you to be holding (on your cursor) a vial some NPC gave you, but I don't think that was for the breath line.
The watefall is probably the one Northish from the dragons, and you may have to go underwater, to the bottom of the pool near the watefall to get the update.
Hard to remember for sure, it's been well oever a year since I did any Drakkin-related quests.
Hope this helps,
Yther Ore.