All this has worked for me as well. One thing I would add
If playing a non-realistic saves game (meaning you can exit w/o saving), you can get major relationship points for breaking lords out of dungeons. If you are good enough to take down 5 militiamen at once with a staff, and then one armored prison guard in 3-4 quick hits (because that's all you'll get before you get jumped), this can be done with only moderate difficulty. When you're riding around playing the merchant like the OP suggested, keep an eye out for notifications about lords being captured; if its not too far out of the way, track them down and go to the dungeon where they are being held. If you successfully rescue them, you'll get 5-8 (can't remember exactly what) relationship points, some honor, and 3 faction relationship points. This is even easier when you are at peace with the captor's faction, because you a) don't have to sneak in and b) can use all your gear.