Once you have gained entrance to the pirate’s hideout, you can tackle this relatively simple quest. Head to the tavern, appropriately called Booze’s Tavern. Search the bar to find an NPC named Hank. Although he might not seem so bad at first, the guy’s a total scumbag. Talk with the prostitute named Holly on the other side of the tavern to learn about his scheming. Now, one of two things can happen. If you talk to Holly for too long, Hank will approach you right there. If you cut your conversation short, you will have to head outside in order to initiate this next phase of the quest.
Hank will walk up and demand 100 gold from you. You see, he is basically Holly’s pimp and wants compensation for you taking up his “employee’s” time. You can actually pay him the 100 gold and be done with things, if that’s how you want to handle it. However, gold is a pretty valuable resource, especially this early in the game. You could use that 100 gold to go towards learning new skills or purchasing new weapons, so freely handing it off to some jerk probably isn’t the best idea. If you refuse to give Hank any gold, this will trigger the quest proper and he will try to take it from you by force.
Keep in mind that you will only have one chance to win this battle (unless of course you load an older save.) If you win the fight, Steelbeard will look more favorably upon you. If you lose the fight, you’ll have to talk with Hank and give him his 100 gold. Word will spread, and Steelbeard will actually think less of you because of this. So be careful even though Hank doesn’t seem like much, and in reality isn’t all as tough as he thinks he is. Just remember to block effectively, holding down the right mouse button when you see him reaching back to lash out. After blocking a blow or two, strike out with your own attacks and send Hank crying back to the tavern. This will complete the quest, rewarding you with 100 Glory points, plus another 50 Glory points for beating the daylights out of Hank. You will also be able to speak with the prostitute Holly as much as you want from now on.