The Forsworn Conspiracy

Upon entering Markarth a violent scene will unfold. Weylin will attempt to kill another citizen, Margret in broad daylight; in-front of guards and clearly seen by everyone. This paints the setting of apprehension which has rippled throughout the city. A mysterious note that a witness says you dropped will be given to you, asking to meet at the Shrine of Talos.

Blood in the Streets
Immediately upon arriving in Markarth via the front gate. You will hear an altercation in the open market. A man named Weylin shouts "For the Forsworn!" and then attacks Margret. If you kill Weylin before he can get to Margret, she will offer a reward, but this takes very quick reflexes if you do not realize what is happening immediately. Typically, she is killed and you may loot a key from her body. In that case, the Markarth Guards will attack Weylin and slay him.

Meet Eltrys at the Shrine of Talos
A man called Eltrys arrives after the incident and claims you have dropped a note and hands it to you. The note asserts Eltrys wishes to speak to you privately at the Shrine of Talos. The shrine can be found on the second level. Once inside, speak to him and he will tell you that something is not right in the city and will ask for your help to look into the recent Forsworn attacks that have been happening recently. You will be tasked with finding clues in Margret's room in the Silver-Blood Inn and Weylin's room at The Warrens.

Tip: Before you do anything save your game. There are some glitches ahead, so you may need this point to revert back to.

Investigate Margret's Room
Margret stays at the Silver-Blood Inn. If you got her key off her corpse you can use that or just pick the lock. On the end-table will be Margret's Journal, this will complete this part of the quest but will start another; Investigate Thonar. If you where successful in saving Margret from being murdered she will be at the inn, just talk to her and that will lead to Thonar. When leaving a guard will warn you to stop your pursuit.

Investigate Weylin's Room
Weylin lived in the ghetto, The Warrens. His room was the farthest on the right. Ask the person inside about Weylin and you can get the key to his room or just pick the lock. In the chest will be Weylin's Note, the note refers to a person called "N."This will close this stage of the quest and add 'Who is "N"'? When leaving a guard will walk up and attempt to intimidate you by brawling, beat him and he will tell you "N" is Nepos the Nose which will advance the quest to: find evidence about Nepos.

Investigate Thonar Silver-Blood
Thonar stays at the Treasury House. Talk to the person at the desk and she may let you speak to him or pick the lock on the door. Inside his room he will not want to talk to you but speaking to him will trigger an attack on his wife. Outside the room, in the main-room several Forsworn will kill his wife.

You can also just pickpocket the journal off Thonar and avoid triggering the attack.

Investigate Nepos the Nose
You will find Nepos at his house which is marked on the mini-map. On entering you will be questioned but Nepos will call you in anyway. Speak to him and he will tell you Madanach is the leader of the Forsworn and is locked up in prison but is calling the shots from there while Nepos the Nose executes the orders on the outside. When your done speaking to him everyone in the house will attack, fight your way out.

Return the evidence to Eltrys
Meet Eltrys back at the Shrine of Talos.

Important: But, before entering save your game! This is very important. Also if you have a companion/follower make them wait outside.

Inside you will find Markarth Guards surrounding Eltrys' dead body. Approach the guards who will say that you caused them a lot of trouble and they are going to pin all the murders on you. At this point you can submit and go to prison or fight them, you can kill all the guards at the shrine and receive no bounty but when you go outside you will be arrested anyway. This sets the stage for the next quest No One Escapes Cidhna Mine.

Note: Heads up this part is riddled with bugs, I cannot emphasize this enough.