What I've found works best for any pickpocketing is to enter turn based mode right before starting the pickpocket. Grab what you want and walk as far as you can before uncrouching. Turn off turn based mode and run. Not sure if it really helps or not, but for the blacksmith there's also a couple of torches to put out.
I've gotten around the bug by using invisibility in combination with turnbased mode. After getting what I want from Dammon I fast travel to the overgrown ruins, turn off turn based mode, and then walk back to the Dammon's location. When I get there Zorru says he's taking me to jail, and I pass the deception roll. My guess is that the script for Dammon's crime scene investigation is either not functioning, or is outright absent, so it skips the questioning phase to him turning hostile if anyone is around at all.
