There is a quest in house Phiarlan called "Purge the Heretics" and if you have never had the displeasure of running it you probably won't know what I'm talking about. Basically, you're sent by a morally dubious silver flame inquisitor to slaughter a church full of lawful good paladins/clerics of the sovereign host and their halflings bodyguards.
First off, I know the principle argument that you don't have to do any quest. It's a choice, and you can choose the morally correct path of not taking it. However, I'd still like to see some other options. A quest like this is pretty icky, even for Eberron. Even if you
My idea is that anybody who is lawful, good or who is able to pass a certain check (diplomacy probably) should be able to speak with a person guarding the front door who asks that you sheathe your weapons and give them a chance to talk. You go inside and are ushered into Oisin the Merciful's chambers where the two of you discuss the current situation. You're told that they have already been informed by one of Phiarlan's spies that the silver flame wants them dead (remember, Gnomon tells you in the tavern that he already asked the elves of Phiarlan to kill them and they said no. They would likely have sent a warning). They have a possible solution and they want your help with it.
Next, you're told to speak with the cleric Celine Peacemaker who has come up with a way out of this. She knows that the Flame likely have a man watching the compound and would know whether you, the player, actually did the job or not. She wants you to help them fake their deaths. Since they were prepared for this they, with the help of Phiarlan, were able to prepare certain magic spells and weapons that cast the illusion of being dead upon their targets. After being "killed" the elves of Phiarlan have agreed to hide the Sovereign Host in one of their safe houses. So you go on out and pretend to kill a bunch of folks, all goes well, and there you go. Problem solved. Much better ending.
P.S. And for fluff purposes, I'm throwing in this. When the cleric is explaining her plan to you you have the dialogue option "Wait, why can't I just refuse to kill you?" She explains that something is wrong with the silver flame, the reason the Flame wants them dead is because they refused to kill a group of "heretics" and were attacked for it. They fended them off then but now they know that the FLame won't rest until they're dead.