A few weeks ago I was in a town to sell Alchemy ingredients and deposit my gold in the bank, when I decided to ask the people in the street about work. One lady helpfully pointed me to the inn keeper at one of the local inns, who asked me to investigate some nasty rumors that were being spread about him:
https://en.uesp.net/wiki/Daggerfall:DefamationAfter asking around, I found the offending gossip in another inn, who filled me in on what the real situation was. However, when I asked around to find the inn keeper's house, everyone just directed me back to the original inn-- which I'd already searched thoroughly multiple times, including in the upstairs loft, and could not find the letter from his sister.
I even tried looking at every house in the rather large city, hoping one of them would show up as The So-and-So Residence, but while I found one or two houses like that, they were the residence of neither the inn keeper nor his sister. And I'm guessing that inn keepers might not have residences per se, since inns never close and hence the inn keepers never "go home" after their place of business closes for the day, so they must live at the inns.
I ended up abandoning the quest by reloading my game to an earlier save, since I'd gotten a few additional quests while trying to talk to people about the inn keeper, and one of them ended up being an unsanctioned assassination which I already knew would make me "pond scum" in the eyes of the law, and apparently there was no way to assassinate the target without being seen.
Anyway, it would appear that the Defamation quest might be broken if the quest-giver is an inn keeper.
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