Great Mastiff Games said:
In short, if an Exalted character knew that killing these gnolls in their sleep would save innocents, then he would make the self sacrifice of killing them and losing his Exalted status.
You are thinking in two-dimensions.
You are assuming that the
only option is to kill the Gnolls in their sleep. It is not.
An exalted character could silently take away all the Gnolls' weapons, have his friends set themselves next to each sleeping gnoll, weapon drawn. He then nudges the gnoll next to him with the tip of his blade, and when the gnoll wakes, put the blade under the gnoll's throat, making his intentions clear. At that point, many things can happen:
-The gnoll goes for his axe yelling (which probably gives an AoO for the exalted character). He then attacks the exalted character (with or wihout a weapon), which defending himself, slays the gnoll. The other gnolls might do the same.
-The gnoll gets the hint, and surrenders. The others upon waking, do the same. The gnolls are then captured and tied down, to be brought to justice later.
In both cases, the exalted prevented innocents to be killed by the gnolls, and retains his exalted status. In both cases, full XP are awarded to the characters.
In fact, in the game session, after the sleeping gnolls slaying room, the next room the PC's decided to captured them (more sleeping gnolls), tie them down, and actually interogated one of them and got useful info out of him. Quite useful in fact.