I know what you meant. I was just picturing the scene... "um, Elmo? Spugnoir? Why don't you guys go get a beer, we'll be ... talking with our new friend here. Just, um... ignore any loud crashing or screams for a bit, will you? Be back in a minute."
Same issue here. I've talked to all 3 suspects and found the children. My reputation page says I've got 3 pieces of evidence but when the captain asks how I know, the only option is still Goodbye. Details: Spoiler I charmed B but he had nothing. I caused fear on R, who confessed. I knocked out P but couldn't talk to him when knocked out, only when he was up and only about read magic being his only spell. From P's inventory I took the gem and the notes. This was enough to find the kids. Took them upstairs but they disappeared, I have an inkling of why that is. The issue might be that I have 2 pieces of physical evidence and 1 testimony. Or that I don't have the locket. I tried also knocking out R to see if he had more physical evidence but no, so it seems I'm stuck.
*necro* Before I get into the issues I'm having (same as previous posters), I want to point out how ridiculously talented two children are that I need a +19 spot to find them, and am curious what epic-level enchantments they used to avoid my True Seeing spell. Anyway, I have R and P in my party. I have P's note and have read it, as well has having had collected the locket. I tried using the locket while figuring out the quest, and it told me it was entered into evidence for my case. The children *were* in my party (I initially took P and the kids out, though the kids seemed to have left my party at some indeterminate point after entering City Hall), and I started the dialog chain that seemed like it would complete the quest. I had feared R and charmed B and gone through that when I took P and the kids to the Hall, though I had not taken R into my party at that time. Anyway, I'd just as soon side-burner this quest but I'm stuck with P and R in my party, and I don't want to just murder them and cast the corpses aside.
As an update, I took each off to a remote location, murdered them, removed from party, used Raise Dead, then ran before they could engage me.