I don't think you must knock them out.
We're talking about regular NPCs though, not party members.
Naturally for party members we just open their inventory and equip it, but NPCs which wear underwear and are not part of the camp yet; such as Minthara/Halsin/Jaheira who can die before joining the camp will not drop their own underwear when killed. They have to be knocked out first for the underwear to appear as loot, otherwise it's lost forever.