You cant be invisible for everything:
In the fall of Kvatch you cant leave the castle untill all the creatures are killed because Salvian Matius will not talk to you, but you could use alchemy to give you the strength, magicka, endurance, health, ect. to get the job done. I doubt this is the only time this occurs.
You don't have to do the killing, though. Paxelle (my non-violent non-killing mage) successfully completed that sub-quest, using basically just Illusion skills. In almost any situation where there are multiple enemies, you can Command creatures to go after each other until you get their numbers down to one, and then you can use a friendly NPC (in this case Savlian or another of the Kvatch guard) to make the final kill. You can assist that person by paralyzing the enemy. Or you can do as Paxelle did, and use paralyze extensively, allowing her Legion companions to do the dirty work.
Also, it's not entirely true that all the creatures have to be killed. Only the ones in the main hall need to be killed, as far as I know.
Your reasoning about alchemy duplicating Illusion's effects is slightly faulty. In order to deliver the alchemy effect, you must use a weapon. In order to deliver a ranged effect, that weapon must be a bow, and you must be at least somewhat skilled at Marksman. Alchemy is useless as a weapon by itself. You also need to apply the poison effect before each use, and if you are going for multiple effects, you'll either need to have multiple poisoned weapons prepared before the fight, or you are going to be constantly "pausing" the action to apply poison. I'm not saying you're wrong about the power of alchemy, though.