Two things - I know the chapel altars don't work anymore to cure diseases, but why do the wayshrines still work? (if they don't, my apologies) It would make sense that they wouldn't because... well, they're basically the same thing.
Wayshrines were allowed to cure diseases mainly for the sake of balance. Low level players without cash can opt to seek out these in case their acquired ailments worsen.
Secondly, I was thinking about the euthanasia thing. While cool in concept, I'm wondering if you're having them kill NPCs that don't respawn. Because if that's the case, the towns could get quite desolate after a few outbreaks.
And, if the one they kill is the one who had the disease the longest (i.e. has had it progress the farthest) - then wouldn't the merchants be high profile targets?
There is no such safeguard in place (currently). But you'll find that it takes a long time for that to happen as such activities only happen when the player is in the same cell as the actor in question. Merchants have no such affinity to diseases - They are treated like any other NPC in the game.
Finally, looks like it's more than two after all, do the guards attack the player if he comes into town with a stage 3 disease? They ought to prevent an epidemic I think...
Yes. They get warned first, though.
10Cent posted some good news about an issue the mod was having. Hopefully, this will speed up its release. In any case, I shan't be opening a new thread when this one gets closed; I plan to reserve that for 0.2's release. If you've got any more questions, PM me.