Found Kematu after talking to Saadia. I decided to try and kill him because I had saved right before. Well, after many trials. The only way I was capable was with a blizzard scroll. This was after I told him I was going to kill him mind you. But upon exiting the cave and talking to Saadia there is no option to tell her he is dead. I'm on PC playing at High/Ultra settings.
I didn't get this bug, I went straight back to Whiterun and saw her, and she gave me 500 gold I believe.
I totally agree with you though, Kematu was very tough to beat, took me about 5 tries, and I used a frost potion on my weapon which seemed to make the final blow. I kept using fury on the other wartriors, but none of them attacked Kematu.
I'm finding this very tough so far, although I'm still only level 8, I have pretty ropey equipment too. My biggest problem is when I'm about to die I try to use a potion or healing but i double tap the up and b buttons (X-Box) so I go back out of the menus, and die.