My method of non-lethal damage
I have a fairly simple set of house rules for non-lethal damage:
You must declare before an attack is made that you are targeting a non-lethal area of the body (yes, I know people can bleed to death from almost anywhere, but this is drama, not ER). If you're doing an area attack, you can specify that some targets will be attacked lethally and others won't (I figure if you have to make an attack roll against each target and you might miss or hit each individual, you must have some basic control over how an area attack fills an area; also, for example, an elven wizard could use elven accuracy to reroll an attack roll against one target in an area, but not the others, again implying some degree of control). If the target is not bloodied, there is no penalty to the attack roll. If the target is bloodied, there is a -2 penalty (the logic being that once you're bloodied, you're fairly injured and there are fewer nonlethal areas left for you to be injured in). If the attack that brings the target to 0 hp or lower is a nonlethal attack, hit points are still lost as normal (including going to negative HP), but the target need not make any death saving throws: they are automatically stable as if the Heal skill was used on them. However, remember that you still die automatically at negative HP equal to your bloodied value, so super-powerful attacks used on a very weak target may still kill it even if they are declared "non lethal," and using fireballs in areas with fallen allies will reduce their HP further, possibly bringing them to negative HP equal to their bloodied value and killing them. Also, any lethal damage taken while KOed will start the death saving throw process as normal.
Exceptions/clarifications: If you're using an attack that does ongoing damage, the ongoing damage is considered to be lethal or nonlethal based on whether the main attack was lethal or not, and it cannot be changed later (if you do ongoing fire damage for example, you can light their beard on fire rather than their flesh). If the ongoing damage is what brings the target to 0 HP or lower, the normal rules for lethal or nonlethal attacks apply as normal (keeping in mind that ongoing damage or a KOed target could eventually bring it down to its negative bloodied value in HP and kill it anyway). Zones which do damage are always considered to be lethal unless the DM rules otherwise. Since minions only have 1 HP and hence no Bloodied value, an non-lethal attack on a minion will always KO rather than kill them, but any lethal damage (a poorly placed fireball, for example) while they are KOed will kill them. At the DM's discretion, certain creatures cannot be attacked nonlethally, but in that case the damage is treated as normal, not ignored (classic examples of such creatures would be undead and constructs).
The reason I did it this way is that I wanted to not make the PCs constant murderers. I figure, if KOing someone is just as easily as killing them, then those who always choose to kill (as most PCs would) now look like the bad guys, and those who KO now have to deal with a bunch of prisoners constantly, which is a headache. This way, you have the option, and it's not too difficult to take it, but you have a reasonable excuse why you don't always subdue (because it's harder and you risk your own life and the lives of your allies if you do).
Of course, this house rule lead to a PCs death, but that's a story for another day...