Did you try casting an area effect spell that doesn't need a target (such as Poison Cloud) near Rak'Sheen, but not directly on him? That might do damage, allowing you to kill him off.
Using a statuette will change your alignment, and could potentially effect Rak'Sheen. If he switches alignment with you, you could get him near a bunch of soldiers and use a spider or beetle statuette. Whatever messed up the normal attack behavior may still keep him passive even if he changes alignment, but it would be worth a shot.
I'm not sure what else to suggest in the game itself. If I had the save I'd try replacing the character data for Rak'Sheen, or see if I could find where the game keeps track of following creatures.
