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I could only loot the mage's shop - entering the east room was impossible. This works with Gero, the armourer, too. But he returns rather quickly, you can chase him away with a few attacks - but don't go out of the shop, guards will attack you.
you can kill innocents without rep.-loss as a spider.
Kiya

And you can walk through the orc infested area: orcs are friendly towards spiders.