During the mission where you are betrayed and go to the flooded district, you have the option of fighting Daud. While the non-lethal option is to simply pickpocket him, I have to say the possibility of the non-lethal option if you choose to fight him is much better than the regular one: http://www.youtube.com/watch?v=nf4ksjftzmE

The pickpocket option doesn't change him, only leaves a message which doesn't really say anything about changing who Daud is whereas if you fight him then choose to spare him, it seems Daud actually has a change of heart and decides to leave the city which apparently doesn't happen if you simply choose the pickpocket option. Just my opinion.

When I fought him I just shot crossbow bolts at him from across the room. He died without my ever getting an option to spare him ...

There is more to be seen if you fight and spare him, indeed!

But it feels way more badass to steal his pouch from his very belt. I mean, the guy is the leader of an assassin's cult which recently murdered the Empress. And you were left to die in a remote building just moments ago. You still manage to regain your freedom, your gear ( should you choose to ), break all his defenses, eludes his assassins, and steal his own purse without anybody noticing anything. If he was already thinking about leaving or at the very least having regrets ( as hinted by the audiolog he records when you first reach his room ), I think his very own pride will be hurt. He will know someone stronger than him knows what he did, know where he is, and left him alive. I kind of like this "So now I'm the boss, so you just behave from now on like a good little number 2, mmmmkay?".

Hah, this is what I did in my playthrough actually. I tried to approach him with time freeze on, but he says "Nice try, Corvo." and begins attacking. So badass.

The lines he gives if you do spare him though are awesome. Might be the best part of the game to me.

^^^^

Agreed. I actually kinda related to him/felt kinda sorry for him in that moment (through corvo I mean).

Hah, I must have too. I was certain I was going to kill the guy who murdered the Empress, but...I don't know, his confession felt genuine. Reading his journals more or less confirmed my choice.

There is a way to spare him? I tried fighting him several times, it always ended with him dying.

Hmm...Did he teleport away from where you originally confronted him and to the broken-down apartment just outside? And if so, did you assassinate him while he was out there?

Daud actually... if you hang around a bit and listen to him talk to himself, he mentions that he
regrets killing the Empress, and wouldn't do it if he had another chance.

Feel like by letting him go, yet having him realize that instead of just swiping his purse I could have
easily ended it all right then before he could even realize what's happening, he knows you've
given him a chance at reform, at a new start....maybe.

I think beating him up and sparing him gives an even greater message

No, I killed him while he was in his room. Maybe I did him too much damage and killed him before I was supposed to. A bug perhaps?

Mine teleported outside and I didn't get an option to spare him, either. Maybe we're not supposed to use crossbow bolts?

Yeah, I didn't use anything but the sword on him. He teleported outside, and you have to not shoot or assassinate him, but instead start fighting again.

I know those are hard urges to resist with how this game trains you.

I would agree with you.... but had to settle for just stealing his junks, for the sake
of my semi-Ghost/ Clean Hands playthrough.

Maybe next time I'll beat some sense into him

I'm pretty sure you can do this with Clean Hands, actually. The combat sleep dart would help with his assassin buddies, but they're mostly out of the fight anyway because Daud constantly freezes time.

Non-lethal is pretty specific about what you have to do, so... no. Can't engage him at all

Really? That doesn't make much sense. You don't have to kill him if you fight him.

I haven't tried a completely non-lethal playthrough yet though.