I have been having the same problem for a week. Resetting the quest does not work. I have had it reset and still am met with the annoying message "You have already disposed of this sheep. Find another.".
I am met with this message no matter what I do. Obviously resetting quest doesn't work yet I cant get any real assistance.
If the quest is broken they should spend 5 seconds and spawn the necessary item (Sheep remains in this instance) to finish it, only fair.