That would bring up the interesting scenario of:

'Right, who's mercying?'
'I am.'
'Right, target (demesne holder)'
*demesne holder gets mercied, then dominate unenemy all*
*repeat ad infinitum to render a defending group unable to set up a demesne*

Reject Mercy command should result in death.
Nerra rejects Marcalo's Mercy. Marcalo *RP related choosable verb- sighs, laughs, grins, ect.* and quickly finishes Nerra off, letting her lifeless body fall to the ground.

This prevents what Inky just said. ALSO! Autoreject mercy command. Self-explanatory.

If a person was about to be killed by a timed instakill for instance, but they were merciful and held off on it, then they really wouldn't be able to finish off their target with one more hit. By which I mean, the target should be dead (by chasm for instance), but when they're granted mercy then the battle effectively starts all over, because they don't actually have afflictions/damage on them. Thus I advocate Nerra's idea. Instead of chasm mysteriously missing, the attacker instead caught them by the hand or on a little ledge of earth, and now that target can't move without falling to their death, unless the attacker helps them back up. It works with any situation, like a person who had a sword to their neck or is being pulled apart by thorns or is simply at the mercy of one more minor-second. The original kill method should still be the one that finishes them off if it turns out mercy just isn't their style.

Although... If subdue lasts for about as long as it takes to pray, then this isn't wholly different from just killing them.

Frankly, I don't even see why anybody would try to shoot down this idea. It's purely constructive, it adds something to the game, and the only reason people seem to react negatively is that it would "create an expectation" of people being given mercy. Oh please; I still am not convinced that the "lol u must pray" crowd isn't arguing purely out of infantile glee at the opportunity to make another player have to spend another couple of hours bashing. And hell, who is going to stop them from not showing mercy? Are they so insecure that they think social pressure would force them to use the ability? Come on.

Out of curiosity, why do we have XP loss in the game?

The older RPGs used to have a form of level loss when resurrected, likely to simulate the trauma of coming back from the dead.

But in this game, with resurrection being the norm after a battle, why is there a penalty for dying. Does it have a specific benefit to game balance to lose XP? I've heard games like World of Warcraft (which I never played) don't have this penalty.

The primary reason for "real death" being penalising is that it screws with suspension of disbelief. Thus, it is made a bad thing so that the players themselves seek to make real death as unlikely as it can possibly be.... of course, the hack-and-slash metagaming twinks don't understand that, and think that if they didn't lose hard-earned experience and got pulled out of immersion by the ludicrously obvious plot device of the fates, then the killer's ePenis wasn't vindicated enough.