@Chaos 303030: Thanks for the continued interest. I'll take you up on that offer for testing when the time comes. There's going to be a LOT of testing required.

All right, time for another TLDNR update!
Well, I've been working hard on Balzu, especially the AI scripting, and I'm making some progress but I've also come up against a bit of a barrier: script lengths. As it stands, I can implement custom AI attributes, disposition indexes, and various flags that are specific to each actor for tracking the actor's personality and their opinion of the player, but I can only have a limited number of actors defined this way. I've been trying to come up with a workaround, but it's still up in the air at the moment how it will be resolved.
I've also been elaborating the suspicion mechanic to implement some features: sneaking players will become progressively more suspicious to other actors. Sneaking for a second or two won't have any ill effects, but prolonged sneaking will draw attention. Additionally, spending any length of time trespassing will make you more suspicious. A guard observing you sneaking while trespassing will become very suspicious very quickly and start following you around until you stop behaving suspiciously. A good deterrent for criminal activity. Also, wearing suspicious clothing (like part of a criminal faction uniform, or part of a guard uniform if you're not a member of the guard faction) will make you more suspicious, even if you aren't arrested for being a member of a criminal faction or impersonating a guard. In other words: if you've acquired items from known criminal groups or items that only law enforcers would carry, you'll draw suspicion to yourself.
I've also been elaborating this mechanic in another direction: shadowing. Although I haven't worked out all the details yet, the basic gist is: if you follow another actor around (spend a lot of time in the same cells and follow them from cell to cell) they will start to become suspicious of you. The more suspiciously you behave (for example, sneaking) and the more suspicious they are by nature, the more likely they are to confront you or try to lose you. If they are on their way to a private destination and they detect you following them, they may change their destination, call the guards, or run to a location they own and lock themselves in, depending on the circumstances. In this case, if you can remain undetected, sneaking is your best bet (but will draw attention to you if you are observed by other actors) but the jig will be up if they detect you. If you follow them without sneaking, it will be harder for them to determine whether or not you are actually following them, but they are more likely to detect you and have more opportunities to make that decision. (This concept was originally inspired by the 'Unfriendly Competition' quest where you follow Agarmir to his home.)
The fines for indecent exposure are also working. It's a very simple system which simply detects whether or not you have various slots equipped. Wearing 'skimpy' armor won't be detected as indecency as long as the proper slots are equipped, so if that's the way you roll you don't have to worry about being harassed by the guards unless you have nothing equipped. Other actors will comment on your various states of dress (or undress) either approvingly or disapprovingly depending on their personality and how attracted they are to you. (The dialogue still has to be written, but the actors can detect it now so it's just a matter of plugging in text.)
Actors can also detect whether or not you are injured and the extent of your injuries. This still has to be elaborated but, essentially, if you are wounded, actors will comment on your state of health, guards will escort you to healers, and healers will heal you (but some will charge you for it). I should note that not all players will start with a basic healing spell in Balzu. That's something you have to learn, either through selecting the correct class or background, or by joining a faction and being trained in the arts. Balzu uses a first aid system that works somewhat like the repair system: you buy bandages and apply them to your injuries. The amount you heal depends on your Armorer skill. (The rationale being that seasoned veterans are good at stitching wounds as well as maintaining their weapons and armor.) Of course, you can always rest or buy healing potions from apothecaries as well, and there's probably going to be a very slow health regeneration option as well.
:cookie: for anyone who read all that.