]
I don't think you feel pain once your soul has been taken, I'm not sure though, If you know of any books in game that could clear this up, that would be helpful. That said, once you kill the creature, assuming he she or it doesn't feel any pain, you might as well use the soul
Losing your soul normally means eternal damnation and such.
In religion and fantasy, the soul is often 'you', aka, the spirit inside of your body, and it's eternal(normally you go somewhere after dying, it doesn't all go black).
Now imagine someone using your eternal soul for a spell or a ritual

In fact, it would be better to give yourself to Mehrune Dagon despite him hating your guts.
Maybe after 10.000 years in one of his torture chambers, you might finally get a chance to stand at his side!
A few 10-100.000 years of pain beats eternal damnation xD