I read a lot of posts about Balin's Necklace quest, and that you either fail one or the other... this is not true. If you continue to run back and forth between Balin and what's his name, and follow the dialogue with Balin asking why a Fat Lout like him... well, eventually Balin will get chapped at you and will initiate the attack, you will be able to kill him without failing either quest, and as a matter of fact you will receive MUCH more XP than if you don't do the run around. Remember, your log says that you will have to "verify" that Balin is a jerk and teach him a lesson...
