The Silke Dilemma is not a true quest, but it is a necessary encounter towards recruiting Garrick the bard into your party.

Speak with Garrick outside the Burning Wizard inn in Beregost, and he'll explain how his mistress Silke is being threatened and needs defending. Apparently she was supposed to perform at Feldepost's Inn but didn't show up and as a result is being hunted by Feldepost's thugs. Garrick offers 300Goldpieces for your assistance, and if you agree to help, he'll take you to Silke who is outside the Red Sheaf Inn.

Once there, he introduces her, giving her the opportunity to possibly change the reward (200/300/400) based on your reaction adjustment and warn you not to give the thugs a chance to explain themselves. The 'thugs' eventually arrive, acting as if Silke had arranged to meet them, while claiming they are delivering some gems. Silke interrupts them and demands that you kill them, allowing you to make a choice.

If you read into the interactions, it should become apparent that Silke is the villain in this situation, while the 'thugs' (Glayde, Faltis and Tessilan) and Garrick are both innocent and bewildered. If you refuse to kill them, Silke turns on your party, forcing a potentially dangerous battle at low levels, yet yielding superior loot which includes a Quarter Staff +1. You may help her, and kill the gem merchants, but only if you'd prefer the -2 penalty to Reputation and have no interest in Garrick as a companion, since he will depart.

Assuming you chose to confront Silke, speak to any one of the gem merchants afterwards to receive their thanks and a Potion of Defense before they depart. Also, Garrick will come to his senses and will ask to join your party if you speak with him. If you turn him down, he will depart and further recruitment becomes impossible, so if there's a chance you'll desire his company in the future, merely don't initiate dialogue until the time is right, as he will remain standing outside the Red Sheaf Inn seemingly indefinitely.

Alternatively you can attack Silke and then kill the merchants anyway before talking to them for a total of 945XP, Quarterstaff +1, Potion of Invulnerability, 3x Potion of Defense and the gems - with no Reputation loss.