There are no bones to pick with other locals. Narfi lives on the other side of a river, separated from the rest.
His sister is indeed killed by somebody, reinforced with 2 iron arrows "in her body" (Arrows spawn where they should, but, due to Skyrim engine, float up and away). But it was long time ago, it makes no sense for people to tie up loose ends after such a time lapse. Plus, they never stopped with killing Reyda in organised attack (Reyda is found almost under the bridge, with 2 arrows in. Obviously she was crossing the bridge and caught 2 arrows at the same time. So the version of one guy having problem with Reyda is doubtful, most likely she was just a victim of some bandits killing the wrong person from ambush), why would they use DB when they could cap the Narfi, living in the outskirts of a small village already?
All this kinda leaves us short on options:
1)Somebody wants to build his own house at Narfi's place.
This easily explains the motive, but who the hell it might be? Who would want to live in such a damped down place, possibly haunted by "ghost"? Svidi, currently known under alias of Lynly Star-Sung. She got here not exactly on her will, but she sure won't be returning to Riften anytime soon. Inn long-timers are somewhat suspicious, settlers are not. She is not the kind of person who would kill people directly, otherwise she wouldn't even be there.
2)Somebody feels pity about Narfi and wants to put him out of misery.
Well, that would be your homeboy Wilhelm, offcourse. He is the one most caring about Narfi situation and knows that things won't get better. Being an inn keeper, he can easily afford himself some septim swinging, so here is that. Never had problems with getting himself a skeleton either, he has/had a small biz on the side with all the barrows around. He DOES own a dragon claw key after all.
3)