My rep got so low Bounty hunters and guards spawned constantly in Nashkel. I fled the area and went to the Beregost Temple to raise my rep thru donations. Returned to Nashkel, Hunters and guards still there. I also got text in the dialog box that said "You have failed", So I guess this is a gamestopper. Spoil as neccessary.

As far as I know, there is no circumstance in which you can 'fail' the BG series of games. Does the "you have failed" message appear in the console or as a character dialogue?

Have you been using the CLUA console and experimenting with potentially game breaking codes?

As you've mentioned, a low reputation can be fixed in temples, so how you have managed to "fail" the game is beyond me.

It does say that. When your reputation is low and you are in a civilized area, a message will appear down in the text box (almost exactly like when you are caught for stealing) except it can say things along the line of "You have failed, guards have been notified, etc." And soon a bounty hunter will walk up to you and declare that he has come to kill you. I believe it refers to failing being able to walk through the town unnoticed. Plenty of bounty hunters, often like 4 or 5, can attack you at once, and occasionally really hard ones. The typical ones are about as tough as bandits. They can be bribed however. It's been awhile since I played an openly evil character though, so some of this information may be false.
-Brainless One

<font color = lightgreen>That is why evil parties, like the one I am currently playing, need to keep their reputation in the 5 -9 range. That is high enough to avoid the bounty hunters and town guards but low enough to not be classified as "heroic" or "good". </font>

No... I know what you're talking about, EB... It happened to me this one time I decided to have fun with a Wand of Fireballs. This also only happened in Nashkel. I have no idea why it happens, though.

Isn't the failure message for when you somehow kill off a plot-essential NPC?

It's been a while since I played this game but I'm sure I remember that happening... Although for all I know I may be completely making that up, I'm afraid.