So I end up in prison, no problem getting a shiv and a pickax, and no problem getting to Madanach. But I want to kill him, I don't want to part of the Forsworn and I don't want to battle the people and guards in Markarth.

The Wiki says just sneak up behind him to kill him and not alert the others, then take his key and escape. HOWEVER - even though I am level 50, I am an archer and apparently my skills with the shiv and pickax svck, because I can't even come close to killing him. He gets me close to dead, hits me with some frost bolt, etc. and kills me pretty easily every time. I even tried to freeze him with a shout - I can, but as soon as I attack him he breaks out of the freeze and then kills me (and the shout often attracts the other prisoners.)

Is there some trick to killing Madanach if you don't have good one handed weapon skills?

i actually had a cheap way to take him out, do what he asks. Then follow him and his buddies to the end of the passage. They will give you back your armor and weapons an potions, now kill them all, they will all focus on you at once though so maybe that isn't the best way to deal with a sneak character.

i actually though that was the way the quest was suppost to go when i first played it.

Also, you don't have to fight the guards of Markath. They'll attack the forsworn, but not you if you. So... do what he says, you're "offically" part of the Forsworn (but forsworn outside the city still attack you on sight) and the guards are more worried about putting down the REAL forsworn instead of you.