I have the 5th Anniversary Edition for the PS3.

I am on the "May the Best Thief Win" mission where I had to steal the book. Well anyways Methredhel got the diary before me so the game then said to steal it from her. She won't put it in her locked chest and she won't turn it in. I've now stolen everything out of her house and even managed to pickpocket her key from her. She has the book with her but when I try to pickpocket her she yells for the guards. What level pickpocketing are you supposed to have to be able to get the book from her? Also, why is she not turning it in? She has a marker on her house, she has the book, and the game says to steal it from her. I have left and done other missions and came back a few weeks later (Oblivion time) and she still has not turned it in.

Make sure you're sneaking without boots on. Try increasing your sneak skill, using a chameleon spell, keeping out of sight better, or pick-pocketing when she's sleeping. She should give it in and you should get another quest update, but no matter, taking it off her should be fine.