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The arrow cannot track you in any instance (yet).
Blizzard does not allow player tracking in instances (again yet) so therefor the arrow stays still.
In the next patch ONLY Northrend instances will allow players to be tracked in instances and your arrow will move around the map. Hopefully they will implement this in older dungeons to ... but chances are they won't. (Just like they should allow mount's and pets again or flying in the old areas)
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