The main aim of this quest is to break in: Venim Manor, which is located in the Ald'ruhn Manor Disctrict. And steal The Hlervu Locket
The front door of the Venim Manor indicates(via the red icon) that its a 24h non-trespassing zone. But when I break into the manor, and if one of guards sees me. Non of them implies to leave the area, or is placing a fine on my head. They dont care, I can just a start a conversation with them. The other inhabitants act the same.
This kinda ruins the whole quest.
Link for a more detailed quest discription: http://www.uesp.net/wiki/Morrowind:The_Hlervu_Locket

#1
I think that's vanilla behaviour - if you are caught trespassing NPC usually give you 30 seconds to leave, without taking any action