I tried it in this game, and if you let the two weeks elapse, you can't talk to him -- you just enter the Guild. And his idiots show up in Castle Harmondale when you Town Portal back to the Castle.The goblins and Guards show on the main floor, jail level, and in that little pathway under the slab in that one cell. As well as in the town itself.
True on the no benefit to giving the tapestry to Niles -- he just says something to the effect of "If I need you again, I'll call you; right now I'm too busy for you, I got what I wanted, so buzz off."
Real nice, isn't he!