This not only gives you heaps of renown (1500 renown to be precise) when you get back, but also makes Westcliff a much more profitable place in the future. Speak to him on the hill overlooking central Westcliff, hand over the cash and then head to the docks by bearing left on the road to the Crucible to make ready to leave.
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This is one of the defining moments in Fable 2 and should be very much enjoyed. Don't worry about leaving your equipment and faithful friend with Hammer, you won't need them where you're going – as a guard in Lucien's army all your needs will be provided for.