The reputation system and the water-gift ritual seem a bit rough around the edges.
1. When you give a water-gift to someone and that makes you neutral or positive with their faction, shouldn't that stop any current combat with them (and with members of their faction, so their bodyguards don't proceed to murder you?) I accidentally ended up hostile with the villagers of Joppa due to giving water to the wrong person, and while giving water to Mehmet made me positive with them again, he kept on attacking me.
2. Quests should improve your standing with a faction as a reward for completing them. I'd already done the watervine quest; it seemed a bit silly for all of Joppa to decide that I must be killed after that because I gave water to a tortoise they hated.
3. Joppa in particular should probably be a bit harder than usual to offend due to its importance to the plot and the time most players spend there. I would suggest, in addition to reputation bonuses there for the quests, that you get a bonus with them the first time you introduce yourself to the elder. Similarly, simply introducing yourself to the Barathumites should improve your reputation with them a bit (since you're introducing yourself as an ally of someone they trust -- either the mayor of Joppa or Argyle.) This will make it a bit harder for players to render the main quest impossible due to a diplomatic faux pas.
4. The negative impacts for doing the water ritual with someone who is hated by another faction are a bit steep and a bit extreme (as far as I can tell, it's the same as you'd get for killing them, but reversed.) Compounding this is the fact that most faction leaders seem to be hated by more people than they're liked by; this means that killing people is a good way to raise your reputation with everyone overall, whereas the water ritual actually ends up lowering your reputation if you do it a lot. That seems backwards. Being a diplomat should, overall, make people like you more than going around killing named uniques, or at least shouldn't make people hate you more.
5. There should be a warning about the penalty for violating the sacred hospitality of the water ritual somewhere. I mean, logically, my character should know the customs of Qud, even if I don't. Possibly a warning could pop up before attacking someone you've done the water ritual with (although there's a lot of ways to attack indirectly, so it could be tricky.)