You were very close! What some people do is kill him and then revive him using a scroll. He will have special dialogue if you do this, and there's no hard feelings because he was holding a knife to your throat.
I haven't used non-lethal much so I'm not sure if someone can be revived from that state. I imagine they could be, maybe with Help or just regular healing. Finally, if you want to pass ability checks and skip combat, you can use the Guidance cantrip from Shadowheart to improve your rolls during the check.
