While I believe that the GM has the right to make the calls that he does, speaking as someone who is addicted to playing rogues, this wouldnt make me very happy - in in this case, I am specifically referring to the 20 being good arguement.
For example, say my rogue is stalking a wealthy merchant, and smacks him over the head with a club (or sap).
While I would be OK with the GM ruling - "a '1'? cackle... ok roll damage but its real.... you kill him? oh thats too bad... perhaps you should try an honest prefession", if I rolled a 20, and in the middle of my victory moonwalk (and who doesnt say boo-yah, or similar on a 20), he did the same, that would be one hell of a comedown.
Secondly, as soemone pointed out, subdual damage becomes real only for environmental effects - although I think it is reasonable to have it 'flow-over' make it a house rule if you like.
(note that on the related thread, the GM admitted to a poor call as regards this)