Okay, so I am a thief. What should I watch out for?

Here are a few things you might want to be know:

SCENARIO:

Billy steals from Buffy. If anyone notices Billy stealing (receives the "You notice Billy stealing..." message), Billy gets flagged as a Criminal. In addition, Billy is permanently flagged as a Criminal to Buffy (and only Buffy) regardless of whether or not she notices him stealing from her. Thus Buffy can take revenge on Billy at a later date should he escape.

Will Billy really be permanently flagged as a Criminal to Buffy?

Actually, "permanently" is defined as "until Billy dies". When Billy dies all of his past victims will no longer view him as a Criminal.

Will snooping flag me as a criminal?

Snooping will not be a crime of any form but it will lower Karma. Also, people will have a chance of noticing the snooping.

If the "permanent" flag goes away at death won't thieves be able to exploit this by purposely getting themselves killed to remove the flag? Shouldn't there be some kind of stat loss or another penalty for them?

First, eventually we'll put stat/skill loss back in for all deaths, so dying won't be something any player will want. Second, since it makes no sense to allow chars to fall below newbie levels when they lose stats, perhaps the problem is that thievery is too powerful at the 50% starting level.

Will I be flagged as a Criminal for stealing from the town chests?

Only if someone notices the theft.

What is the definition of someone "noticing" the theft?

Anyone in the area receives the message "You notice Jim trying to steal..." message or an NPC notices you and calls for the Guards.