What I had in mind for my story is that it could be told by someone, either by someone who witnessed it or someone who heard about the events and tells the tale to an audience. This is why the story is not told from the viewpoint of the Herovillain and why the filler pauses are there. And this is also why it starts with the city layout and the history and the people, the teller wants to situate the audience first. 'This is the city, this is how it got rich, and here is the one we will be talking about'.

I know that Pickpockets, Purse snatchers and Thieves are pretty much the same thing, but they all steal in a different way. This is more to illustrate that pockets were picked, purses were cut and things being stolen. And I thought it gave it more of a 'told story feeling'.

"is this the most eventful part of your character's life?" "If no, why aren't you showing that."
Becoming a city guard and defeating barbarians is probably a highlight of sir Morgon's life, but the purpose of the tale is more to discuss morals, do people agree or disagree with sir Morgon, do they think he did good or evil. Is he still a hero or is he a villain?
Which is why I stopped before the story would turn into a rebellion against him and him probably being killed at the end for his misdeeds against the people he was supposed to protect.

The Rebellion of Ostagon would be another story, or part 2 of the Tale of Ostagon, where it's shown that regardless of the opinions of the audience, the citizens considered him evil.

And then part 3 could look at the results of the rebellion: will it benefit the city or will they succumb to theft and murder and the lawlessness sir Morgon thought would happen? And the story in which the future of sir Morgon arrives would focus on different morals than what we needed for this competition: what is and isn't allowed to do when you are trying to survive.

Anyway, back to your review.

The 'it' when referring to the boy was intentional. Showing, as you said, the dehumanizing sir Morgon goes through. They are criminals, not people, and he will not stand for lawlessness.

It's great you liked the last sentence, I'm pleased with the ending myself. I usually don't do endings well, I've had feedback before stating 'if you had stopped here it would have been a more powerful ending', which is another reason why I didn't elaborate on the events after that. I wanted to end strong.

That being said, I would like to talk about your edit if that's okay, feedback on your version of my story if you will :)

You wrote "the main streets were filled with tailors, goldsmiths, glassblower, artists, pastry bakers and everyone had ample choice (...)", it gives the impression there are tailors, goldsmiths, etc, walking on the street, instead of being in shops located at the main streets.

And with your suggestion to remove 'at' and 'itself' from "At the junction itself was the oldest inn of the city," you will get "the junction was the oldest inn of the city", which you incorporated in your suggested edit. But, it suggests the name of the inn is the junction. Using 'at' places the inn at the junction.

Your suggestion of "The good people of Ostagon had fewer travelling there and trading or buying goods" feels a bit off, and Grammarly also gave it a red line, with the explanation: "Incorrect quantifier with uncountable noun: it appears that the quantifier fewer does not fit with the uncountable noun travelling. Consider changing it."
I think fewer people would be better in this case, but I'm by no means a grammar expert (I actually had less first, but then I learned it had to be fewer instead)

That being said, I will consider all the changes you suggested and I thank you for your detailed feedback. Some of the suggestions you made are definitely an improvement.