I've also considered capturing rules for getting into these situations in the first place. Here's my latest idea; critique it as you desire:
Capture
In order to capture an opponent, you must have a weapon that normally deals lethal damage in hand (including a gauntlet or monk unarmed strike), must have successfully pinned them for at least one round, and must have taken no other actions in your current turn except free actions and/or a grapple check to maintain the pin. You also must not be engaged in grappling with any other opponents (your allies, however, may freely grapple with you as you capture). If you succeed on a grapple check to pin the target again a second round, you may elect to attempt to capture the opponent in lieu of your remaining attacks/actions for your turn. You provoke an attack of opportunity from foes other than those with whom you are grappling. If you are dealt any damage from these attacks, you fail to capture your opponent. If you are not dealt damage, make an opposed grapple check against the pinned foe. Success allows you to hold a weapon to the foe. You may only use a light weapon which is in hand, and you gain the future potential to make an attack against the pinned foe (see below). The weapon's natural threat range is doubled for this attack (e.g. a short sword would threaten on a 17-20, or on a 15-20 with Improved Critical).
If you successfully hold a captured opponent for one round, you may attempt to capture them again (using the same rules as before). Failure does not indicate that the foe is no longer captured; simply that you fail to increase the level of lethality toward the target. Success means that you automatically threaten on your attacked against the captured character, and you get a +4 bonus to the roll to confirm the critical hit.
If you are attacked while you have a character captured, you may choose to activate your free attack. Your attack occurs simultaneously to that of the attacker who triggered you, so you may successfully complete it even if the foe drops you. Make an opposed grapple check against the captured character. Success means you have hit and deal appropriate damage. Use the natural roll result with the appropriate threat range modifier above to determine if your hit is a threat. On a threat, roll a new grapple check against the foe's previous opposed check, but use your own size modifer or your opponent's on your confirmation check, whichever is lower. Success means you deal critical hit damage, and the target must make a save vs. massive damage. If your critical hit dealt damage greater than or equal to their Constitution score (or in a low-MDT setting such as d20 Modern, equals or exceeds their MDT), their save suffers a -5 penalty. Failing the massive damage save means the captured character is dead.
A captured character can escape simply by escaping the pin. However, the attempt triggers your free attack. If they succeed in escaping the pin, they are no longer captured and thus you make only a regular grapple check, without the chance of scoring a critical hit. All other rules for the free attack apply as above.
Once you have used your free attack, you cannot make another until your next turn.