I still think that killing Amalas isn't an appropriate response to the situation and should probably have a virtue drop associated with it. After all, it's not okay to kill the child that says that elves have the clap if the PC is an elf . . .
I think the death issue is due to the fact that BioWare (or, indeed, just about anybody else) wanted to go to the trouble of giving half the people in the game MINHP1 items and coding scripts so that they surrender when you've beaten them. It's much easier to just let them die and be done with it. I mean, take a look at how crime is dealt with in the city: Nobody is thrown in jail, nobody has to pay fines, nobody has to do community service, it's more like "You have been found guilty of pickpocketing! The penalty is death!"
By the way, the girl doesn't know what she's talking about, she's just repeating what somebody else said.