Because I checked the http://www.uesp.net/wiki/Main_Page and no bugs were listed for that quest. That site is pretty thorough.
Your PS is a possibility I suppose, but your rep with the Redoran guards shouldn't be terribly high at that point. Wouldn't think so anyway.
To be honest, the UESP for Morrowind doesn't seem as thorough as the one for Oblivion. For example, (http://www.uesp.net/wiki/Morrowind:Disintegrate_Armor) states that Disintegrate Armor and Disintegrate Weapon on self deals no damage. My testing concluded that it was false and it does indeed work on both accounts (Disintegrate Armor and Disintegrate Weapon on self). It's not completely straightforward, but nothing a tad bit of testing couldn't unravel.
Another example is the following: http://www.uesp.net/wiki/Morrowind:Telekinesis
That particular link doesn't state that Telekinesis does not work on books or scrolls. It may seem like I'm nitpicking, but those are just two examples off the top of my head.
With that being said, it's still a great source of information and I do look at it to make sure that I'm not encountering any bugs. I did look at the UESP's page for Rescue Varvur Sarethi prior to making this thread. This does not mean that just because it's not stated in the UESP, that I will automatically assume that it's something wrong on my end, as there appears to be other subtle things to be missing from the UESP (Like the examples I gave above).
Anyhow, my general reputation is fairly high right now and my Redoran reputation is moderately high. On top of that, my reputation with guilds friendly to House Redoran is fairly high. Just a theory anyhow *Shrugs*.