Of course I’m aware this is a tricky thing to implement, especially with the (hopefully) real Radiant AI in Skyrim, but there may be ways that every single character in the game could be mortal without breaking the game completely.
There are two important directions for this matter: player versus npc and npc versus npc. If the player can kill a key npc, there is no logical explanation why every other npc or creature couldn’t. But the question is: does it have to be logical, as long as it gives the player more freedom of choice? Although the player wouldn’t be there to witness the npc vs npc fight where the magical immortality happens, it’s still a half-solution. Besides, there may be a fight situation where the key npc fights at once against the player and another npc.
Another way would be making the key npc’s very hard to kill. Either very strong in their skills, or 24/24 heavily guarded. Killable, but with insanely high difficulty. If I’m really that pissed that I want to kill the damn count at any cost, then I’ll have to put a great effort and patience into this. Then again, how about poor/commoner quest-related npcs? They are not guarded and aren’t suposedly too strong either. That could be a downer, you can’t design the whole quest lines only with counts, fighters and kings in mind.
As you can see, I’m yet to discover a way this could work. Maybe you have better ideas on the matter. All I know is I want everybody mortal and no more “X is unconscious” messages. Immersion breaker, especially when the unconscious npc is on the other side of the map, possibly not yet met by the player. Mortal npcs would add a lot to companions as well. Knowing he/she could die will boost your emotional involvment.
As concerning the quests that you may fail by killing different characters, I liked the quest network in Gothic 3. Many alternative quests. If you choose to help a party, you receive immediately a list of alternative quests that you failed in that very moment. You can kill a future quest person and you get the red message right away, telling you what quest you missed by doing that. It adds to replayability too.