I travelled over to Qeynos yesterday to finish some monk quests, and decided to swing by and see if Hadden camp was open. As I approached from the south, I saw Hadden standing there - no one around. Went up to him, killed him (easy fight at lvl 51), he dropped the earring. No muss no fuss.
To fix faction, I went into Blackburrow afterward. My factions with Merchants of Qeynos and Guards of Qeynos were previously maxed out. They maxed out again after about 10 gnoll kills. Stayed a while, collected a bunch of gnoll fangs, turned them in at Qeynos arena to fix Antonius Bale faction, and all was fine.
Easiest 2-3K I ever made. So yes, the earring still drops. Yes the effect is permanent (was swimming around in BB wearing it). Faction can be fixed.
Some minor justice after all the missed rolls and endless camps I've had.