LOL yeah that's Ridiculous

There was a great mod that fixed it for Oblivion, for got the name. xP

Would definitely like to see some major ai improvements for the guards. I don't want some psychic superhero guard coming to save the day every time I accidentally pick up an object.

Weird is certainly one way to describe it.

Ridiculous, absurd, lazy, amateurish, oh-my-god-I-can't-believe-an-entire-team-of-designers-ok'd-this-feauture-ish are some others.

One of the worst features in a video game ever.

I think if a guard is close to the house or area when you kill someone (Lets say 20 yards) and they actually manage to get a scream out they should come (If I hit them and they only have a bit of health left then I hit em again to kill them, if they managed to talk only guards in a small immediate area should know...) while if there are no guards around the NPC will run around to find one to be safe... If you let them escape when they reach a guard and you are nowhere around forthe guard to see, you should be okay...

Also stealing something mediocre in value should not raise any attention from the guards, nor should getting caught stealing something void you of everything you stole whether it was the owners or not...
I would have to say anything over the value of 50 gold stolen should bring guards into play, everything less than that should be up to you and the NPC you stole it from...