Saving the game and going on a city wide killing spree makes it obvious there is a disgusting amount of essential NPCs in this game. Is it possible to create a mod that makes the game handle essential NPCs like New Vegas does? Meaning that every NPC is killable and killing them simply fails any related quests on the spot, and alerts you of the failed quest? Or is this beyond what is possible with current modding tools? I understand there are two mods out there right now that handle essential NPC's, one of them seems to not be working properly and one of them only makes it so NPC's become non-essential after all associated quests are completed.

Yes, this could be done. It'll be a lot of work, though, and not all quests are set up with "fail" stages.

What I'd also like is for guards to stop respawning after a city has been razed...

Maybe have a look at Princeshroob's No Permanent Essentials http://skyrim.nexusmods.com/mods/25137/?