There are two important quests here. The first is to get some Dragon Armour. The second is to kill Raskallion so you can get the Assassin's dagger from Scanthril. However later on you will be required to deliver some letters to the stout guards to get promotion in the warrior guild, and you can't do that if you've killed them all. It's best to get the armour and stay friendly with the king.
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