[quote=The Silver Paladin]
SO get rid of the Blood Dragon armor before talking to people who aren't in them and make sure they don't find out any of that stuff? Got it!
[/quote]

Really, it seems only Logical.
Like in Skyrim, if you go into a hold with a large bounty in said hold- people will attack/run away from you. Get rid of the bounty and nobody will bother you for a while. Kinda the same idea.