I opened the letter from Jarl Siddgeir of Falkreath but when I speak to him there are only two dialogue options, both of which do not produce any questlines. Is this a bug? How do I fix this? I have completed all other Falkreath quests and I am NOT a member of the Dark Brotherhood.

Have you read the letter? Just having it in your possession doesn't trigger the quest.

Go talk to his steward. I've had this happen and, if I remember correctly, the option was there when speaking with Nenya.

You said you did all of the other Falkreath quests. Are all of the bandit lairs in the hold marked "cleared"? You might have to wait for one to respawn.

I opened the letter so I do have the questline. I did clear all bandit locations except for Knifepoint Ridge cause that's where the Jarl usually sends me. So maybe I have to wait for other bandit locations to respawn. I will try talking to the steward too. Thanks for the help guys.

Do you have any other "kill the bandit leader" quests open? If so, this quest won't trigger until you complete them.

No, no other kill the bandit leader quests. I think I just have to wait for other locations to respawn cause when I went back to an earlier save, I got the questline and the jarl sent me to embershard mine. Something similar happened to me in Dawnstar because I had cleared all the giant camps and had to wait for them to respawn because the dialogue option was not coming up to kill the giant.

Did you have the letter with you, while you where trying to speak to him?