It seems to be working as intended. You just need to go there from time to time and interact with her (only once per day). After some time, the game will progress.
That is true, but interactions with her also trigger her "I've spent all my possessions, I am good at art, this is what peasants do" (-10 pride) interaction repeatedly. It is possible to progress to her moving into castle, but some people won't be persistent enough to get to it, and there is definitely a bug there.
Update: Also the quest related to Lana did not progress after she moved to castle, still has "Visit her from time to time".