In order to buy the key (say "help" to buy it) you must give him 100 gp as a donation, then he will ask for other 500 gp, at last, he will sell you the key for 200 gp. When speaking to simon be sure not to say 'help' then 'yes' then 'help' then 'yes' repeatedly, or he charges you extra gold for no reason. Just say 'help, yes, yes, yes' until you have the key.
Click Here to Show/Hide Spoiler Information
Spoiler warning:Quest and/or game spoiling details follow.