Cool. Since there is a downside now, maybe (C)hatting with Yergius should give a new dialog with a decision point?
"We need more men/women like ye! Would you like to join the guild?" [y/N]

I think I would disagree with Ben. Instead of having the decision point, just make it so that earlier pickpockets/store robberies don't count toward your Thieves Guild 'joining'. That way, if you have pickpocketing and talk to him, you aren't automatically joined. You just get 'If ye'd like to join the guild, prove yer worth', and have to go through the 'proof' while he's 'watching' you.

That way, if people are working toward joining the guild, they *know* they're working toward joining the guild, and thus the Y/n becomes sort of immaterial. You can always get Yergius' pickpocketing without having to return and ask him about joining again.

I'm not claiming it does, but doesn't the theft counter only start after the quest is received? Asking out of curiosity.

Haha! So merchants are automatically exempt from suspicion. :-)