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pro
That guy, a self-proclaimed newbie, could not have done what he said he did.
"Could not have" is pretty strong language. Given what you've said, I don't see anything that would make me that certain. Besides, he doesn't claim to have taken everything, afaik.
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pro
For one, he was an overloaded felar.
Maybe he dropped some stuff so he could loot you?
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pro
Two he says he saw me take my things. I am a thief, I sneak, you wouldn't see me.
Did you have autosneak? If not, are you certain you aren't mistaken about being sneaking at the time?
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pro
Add to that, by the time I got back to town He was being attacked by the thief that got me and I watched him leave the town BEFORE I got to my corpse.
Maybe he looted the stuff before he got attacked and had to leave town?
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pro
I went back and looked at Iltch and saw him/her/it with a signifigant prortion of my stuff.
Was it unique? If not, how do you know it's not something Iltch already had? Could someone (not Iltch) have looted it from your corpse, then given it to Iltch without his knowing it came from you?