Otho will not share his thoughts on the murder, no matter what you do; it is best to just not ask him about it. This is a relatively minor quest. You only missed out on a level of Restoration and a bit of experience by not completing the quest, so there is no need to start over. Otho's opinion of you doesn't really matter, especially if you have a level of Repair or are far enough to have found better merchants (ie in Ars magicana).