If your rep gets too high...just KILL SIR SARLES, I dont want to be the only one!
Seriously though, things like that, you get the most xp for giving him the real stuff which you need for the mace...so give him the real stuff, end the quest, then slay him, simply have one of your evil characters do it, and keep your good characters the hell away from the act or they will get mad. If there is something you could get by killing someone, do it. That will keep the rep manageable.
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"Not everything ends the way you think it should"