Lylac bluestone adhesion problems

Stone curl can be maddening. It is usually caused by differential wetting in the stone. The bottom of the stone soaks up moisture from the mortar and swells, thus causing a curvature in the slab. The stone swells and expands, but it usually does not fully contract after the wetting cycle and the stone bow remains.
This is similar to the problem of Thermal Hysteresis in marble cladding. http://www.stoneply.com/techb_thermalhysteresis

As I see it you have 3 options.
1. .Seal the back of the stone with a brushed on coat of slurry, let that set up and then come back and brush on a fresh coat of slurry and install it in mortar or thin set. This slurry coat keeps the mortar moisture from migrating into the stone.
2. Saturate the stone with wet blankets or immersion for a day or two before setting it so it all swells, then set it and cover it to hold in moisture until the mortar cures.
3. Install it with a non-water based material such as epoxy. Expensive, but it will work.

Since I have not seen the job site or the stone I can't say which is best.
Good luck.

http://www.stoneply.com/

http://www.strombergarchitectural.com/

I wouldn't use any stone that curls. If it's taking in that much moisture, you're going to have durability problems.
If it popped due to curling the hardened base, I'm guessing,would be deformed to the shape of the stone, thinset may or may not work to fill any voids. Either way the stone is being raised the thickness of the thinset. That as well may not be a problem. In the middle of a paving job it stands out. I've seen guys use straight glue successfully.
Whats going to keep this from swelling in the future? I know bluestone is common back there and has been used for years. We don't use it here, but anything I can think of that absorbs water is going to pop and split and look like shi... rhymes with split.
Read Stacker's flagstone thread below for grout suggestions. If you're in a heavy freeze area, lime, I believe, gives your grout certain air entrainment qualities that are desirable. I don't worry about that here.