So I just started this quest for the purpose of acquiring the breastplate because it looks amazing. It took me a while to figure it out but if you come out of the house right after proving the writ is a forgery and just attack him instead of  talking to him, you can come back and it will give you different options. The two options I receive at this point are LIE and tell him penworth gave it to me or tell him I had to kill a few people. If I lie it doesn't work, he pays me and I get the experience and the ability to trade. If i tell him I killed people, he becomes disgusted, allows me to keep the breastplate but I'm on bad terms. So clearly i'm looking for a different method to acquire it. The guide makes it seem as though you can lie and get the money and the breastplate, which I assume would also keep me in good graces. Has anyone had any luck with making this happen? Or perhaps is my character just unable to lie effectively due to being mostly honest?

 

Thanks

Has anyone successfully lied and gotten both the chest plate and still been able to trade with them?

I believe it's a mistake in the guide.
I tried everything - raising my Deception to max, raising Honesty, other skills and attributes, it doesn't help.

Bet you can't have both armor and a gold reward+reputation.
I'd say more - you need to kill Penhelm outright without beginning a conversation in front of that house and inform Osric that you killed a few ppl for this one.