I would post screenshots but I've played quite far from that point so I can't get them. I have checked the walkthroughs provided in the quick links and they were specific about which cave it was (an unnamed one), with the hunter standing outside. I went in BEFORE levelling up and there were only lizards in there. When I levelled up, I had to speak to the hunter to spawn the hellhound, and the hunter came with me. After killing the hellhound he took its head and left. I think he's totally gone, which does imply that I did the right quest. That's the only hellhound I've discovered so far, and looking back at the details, and having covered all overground map and checked it with the maps provided here too and I'm 100% sure it's the right cave. On the map it's called 'The Hellhound's Lair'.
'There's not much here, but Sinderbrand will want your help killing a hellhound provided you have enough strength / a high enough level (average level 8 or so). Once you're there, follow him down, and join him in killing the hellhound. Doing so gets you a nice chilling band ring.' <quoted from the map. I got the ring from him.
'Potionmaster Hrank has you kill a hellhound that inhabited his prime herb collecting locality. He gives you a reward for killing it, a book which improves your skill with smite.' < also quoted, this is the part that hasn't happened.
Decade old bug noooooooo.
Thanks, though. It's not the biggest problem, but I just wanted to make sure there wasn't something I could do to fix it.