I tend to follow the damage heavily to within 9 or so hp with outright damage, then switch to knock out. Though it to me defeats the purpose, I'm only going to knock you out, but before that I'm going to try and maim you significantly.
Don't think of the entire HP bar representing amount of injury. Think of the first 50-75% as whittling down the enemy's stamina/energy. Thus, when you've brought the enemy to 25% HP remaining, you've really only given them scratches and tired them out so they're easier to knock out with the next hit.
Right know knocked out NPCS are treated exactly like dead ones. They never get back on their feet, the game never acknowledge that you spared them, etc.
We are all guessing (hoping?) that the system is not in place yet and Larian will expand it in the future.
Knocked out NPCs do get back on their feet after you long rest. If they're not getting up for you, it's a bug. But yes, the problem is that the game never acknowledges that you spared them as they immediately aggro if they see you.
