I'm on my third play-through of Oblivion while i'm waiting for FalloutNV to come out, and just had this quest again. The first time I played Oblivion, I left him alone but as I was headed back to Traven, it began to bother me because if that had been done to me, I would hope someone would put an end to my situation...so I went back and left him deader than dead...and hoped that he wasn't reanimated again. He doesn't attack you until you force him but it doesn't count as an assault or murder.
First game: Lacille, game got the animation bug on PS3, couldn't finish.

Second game: Kicenna, had learned a lot, great game.
Third game: in progress, level 16
Fourth game: somewhere down the road....