Okay, I fixed it. I also fixed, well... a lot of things. <img src="smileys/smiley36.gif" border="0" align="middle" />
I'll try to explain all the changes I made.
The biggest problem with the dialogue system was that you were trying to create new objects for each part of the conversation, which wasn't necessary to do at all. It gets very messy trying to deal with all those objects, and the way I set it up is much simpler. Instead of having all of those conversation objects, there's a single one, simply named Conversation, with all of the different pictures set as frames of an animation. Normally, that means it would cycle through the pictures as an animation, but I also set the animation speed to 0, meaning it doesn't move; at that point, you use events to set the animation frame, switching between them as you want.
In addition to the conversation pictures, you also tried to create different text objects for the actual words. Again, you only need one text object. For each part of the conversation, you can use the text object's "Set text" action to display the dialogue you want.
Same goes for the "Next" and "Close" objects -- you only need one.
To advance the conversation, I gave Next a private variable called "Convo". When Next is clicked, Convo is increased by 1. Based on the current value of Convo, you change the conversation picture and the text to be what you want it to be.
Also, the thing mentioned before about putting all the pictures into an animation with a speed of 0 can be applied to things like the corpses, which I did for you. You won't have to have separate objects like Corpse1, Corpse2, and Corpse3; just one object called Corpse, with all three pictures in it. In the editor, you can click an object and set its initial frame under the "Properties" section.
I'm not too good at explaining things, so don't hesitate to ask any questions if I confused you with all of this. <img src="smileys/smiley1.gif" border="0" align="middle" />