Awesome! I had no idea a computer gaming ethics thread would result, but I like it.
For my part, I feel that the question of whether it is a bug or not is irrelevant. To me, the ethical question is one of playability. Does it ruin the game that there is a way to kill green characters without suffering from lower faction ratings? In Wizardry 8, I think it does not. I can't think of any major gameplay advantage you can gain by this subterfuge. Further, I think it would be unfair for this type of thing to be impossible. The designers seem to agree: There are a few green NPCs that you are allowed *by design* to kill with no consequences, e.g., the Rapax Constable.
So I conclude that it's open season on annoying NPCs. Besides, it isn't without risks. None of the murder methods being employed are foolproof, and the individual victims fight back.
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