I am pretty amazed what kinds of RPG players exist. I would not even think about just killing everything just to add another level or 2 to my characters. Maybe if i try to roleplay a brainless murderer. Does not sound like too much fun from my perspective. Maybe just play DOOM?
I know this is not contributing anything to this discussion but it is simply something i had to comment...Sorry for that.
I will try to contribute a little bit though.
Making every living thing killable is good from an RPG pov. The OP stated that it does not influence the outcome of the game IF you kill everything but to achieve that you must plan in detail when you can kill which npc. Since some DO contribute to either Story or quest. Killing them at the wrong time could cost you more XP than the
kill gets you? Or did i misunderstand that?
You loose reputation for certain actions already so there is a penalty in play. Not that it changes much but that may be to the early stages of the game. Making non-combat NPCs net 0XP is actually a good way to discourage certain people from killing them. Or only for loot

.
And alignment penalties? Do we have alignments? :O I only remember them from AD&D and going against them was not too good, especially for clerics of palas.
I am just really glad i never had someone like him in my RPG times.