Yes, setting health to 0 is the main thing. In addition, you may want the body to be "fallen over" to look dead. After applying the multibounds fix described in the faq here, you should select the NPC and click the "Run Havok" button in the top toolbar. This will cause it to run havok physics simulation and ragdoll to the ground.
I have to admit, I have done this, and still found the #%^(@* NPC wandering around live sometimes, and I do not know why. If you find this, and you can solve it, please update here. Making sure the dead NPC had no script and no AI packages seems to help.