Indeed. I solved it by using voodoo to mind control various people to attack each other in the village. Turned into quite a mayhem, but in the end Garcia was dead and nobody blamed me for it.
I had to do that too, it was hilarious - somehow it ended up with the villagers throwing spears at each other, even though I'd only used the sceptre on the pirates.
Another bug, quite an annoying one since many players will want to learn the most powerful skills just before the endgame. The trainer who teaches all the high level blades skills becomes unavailable once you know the location of the final area.
You don't get any dialogue options with Alvarez from that point on. After getting the last artefact, make sure that you don't ask Steelbeard about the Water Temple until you've got all the skills you want from Alvarez.
Thankfully, this was one occassion where the ridiculous number of autosaves came in handy, I only lost about 50 minutes of progress.