Have you wandered around south of the poor quater, north of the graveyard, west of where you meet the old man? disappearing gems screen shot

Every time you ask Otho about the murder his opinion of you drops by 10.
Did you refuse to get George the Drudanae herb at the start of the game? That will break the murder quest, even if you later bring him his fix. Did you go through all of the speech options with the vampire?