I have another update, I went and did the
http://wiki.project1999.com/Muffin_for_Pandos quest
a ton of times, and I'm now warmly with Tearon. I suspect I became KOS from doing
http://wiki.project1999.com/Innoruuk_Recommendation three times
However, I did Innoruuk Recommendation three times PRIOR to doing any part of Tearon.
I still believe there may be a bug around the faction change. It seems as though my faction wasn't reflecting correctly with Tearon until the Lenya hand-in.
Perhaps doing the Innoruuk Quest three times first could repro it?
If not, I've now resolved myself being KOS, so if you can't repro, feel free to close this.