On a side-note killing ANY wanted ship will reduce your rep with that faction but at present you don't get any positive rep with the faction that issued the bounty either so avoid killing ships of any factions you want to get friendly with.
While you do lose rep with the faction you shoot still, they fixed not getting rep from the issuing faction in version 1.01. Same goes for conflict zones. The only problem is there is a UI bug that doesn't SHOW you getting reputation but you ARE getting it.
EDIT: found the quote I was looking for.
The reputation was fixed in 1.01 so that you receive reputation when you cash in your bounties. However the GUI has a bug so this isn't shown.
Michael
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