I'm pretty sure the officer reputation levels changing has been in the game since the stock version, but I never really paid that much attention to it. Reputation changes in officers appear to me to be the result of cumulative actions, and are not necessarily automatic, which can make it difficult to track the changes. (I'm still playing a Build 12 version of the game and it doesn't have any of the subsequent updates. I'm tempted to update, but I'd have to figure out all the changes that I've made to my game that I want to keep, so I'm still reluctant to upgrade and test the Post 12 Builds.)
What I do recall having seen of this is when there's a fight in a town and one of your officers hits one of the soldiers, I'm pretty sure that the individual officer's reputation drops and you the player can reap the results with the traders sometimes being unwilling to deal with you. (One thing I always liked about the game was how if you got into a fight in Oxbay, Malcolm (Invulnerable Malcolm!) would come running along to join in. As long as you didn't accidentally hit him he would cheerfully attack anyone who was attacking you. What a guy! It was also fun when you would have Danielle with you, when fights occurred, and they would accidentally hit each other and start fighting.)
I'm reminded of how I had to learn, whenever I leave Oxbay and run into the "Toll" Bandits, to let the bandits approach and talk to me before killing them because if I attack first the two officers come to the aid of the bandits and I get a reputation drop. <img src="http://www.piratesahoy.com/forum/style_emoticons/<#EMO_DIR#>/mybad.gif" style="vertical-align:middle" emoid="
" border="0" alt="mybad.gif" />
I'm also fairly certain that an officer's reputation will go up if they participate in rescuing the damsels in the inland sections of the islands, and I wouldn't be surprised if they got a boost from being assigned to officer slots when you take and complete a trading mission. They certainly gain experience from participating in those missions.
I have never seen a rep drop from ransacking the chests in empty houses that I can recall, nor any drops from smuggling missions or fighting with the costa guarda. At times I would run smuggling raids early on, hoping the coast guard would show up as it would usually enable me to capture 3 very nice frigates. It always struck me as funny that I could sell the captured frigates in the ports of the same island from whose coast guard I had stolen them from.
Oldtimer, one of the things you mention is officer loyalty and this is something that I have noticed in the game, if you assign an officer to be a captain of one of the ships in your fleet, some of the officers will follow the orders you signal to them and others will "Sail away" in spite of repeated signals to either attack or defend. Also, some of the officers will not follow the direction for "Fireship" and others will. Very interesting. I have found that Leborio Drago is one of the officers that will always follow directions and Danielle will almost never do anything other than sail away. It would be a neat feature in the game if your really capable officer suddenly decided to go off pirating on his or her own, and you as the player could have the choice of hunting them down or just letting them go. The decision would be especially fun if said officer happens to determine that the opportune moment for departure has occurred when you are getting pounded by a large fleet of enemy ships. Kinda would make the "execution" feature a lot more fun cause it has that "payback" quality to it if you capture one of your former officers who mutinied. (There are a number of Koei games that had a feature like this, and you would find yourself when, playing these games, assigning mediocre quality officers over superior quality officers because the chance that they would betray you and rebel was often lower when their abilities were lower.)