In this particular situation, calling Garrett's attack on Bafford a Terminal Situation sets what could well be a dangerous precedent.
Not really. Terminal Situations occur because the GM says they do.
Anything that sets up a Special NPC to be one-shotted becomes an easy way to completely bypass any meaningful combat. Sure, certain circumstances have to go the character's way - the NPC must not be aware of the threat, and the PC's have to successfully get into Melee range - but IMNSHO* Special NPC's are special - in part - because they've lived long enough or are paranoid enough to avoid these sorts of situations.
Special NPCs are special because of their role in the campaign or adventure's narrative structure.
Sure Garrett would like to drop the Bad Guy(tm) but I think someone back on p2 of this thread hit on the solution - distract him instead. Create a disturbance somewhere else, and draw off the "experienced combatant" who in all likelihood will see the attack coming and be able to fight back (possible crit on the attack roll notwithstanding).
Or why not just charm him, or seduce his wife, or any of a hundred other tricks.
Oh, yeah, because that's not the question the OP asked, or what the player and GM wanted to do.
Not everyone will have Code vs Killing (to steal from a much much less impressive game
) and if you allow this situation to be a Terminal Situation, I fear you'll have arguments on your hands later on down the track when someone sneaks up on your carefully designed SNPC and says - "so this is Terminal, yeah? I spend an action die and kill him". On the flip side of that coin, it makes your Assassin's Guild SPNC's incredibly dangerous, as they could off the PC's without any problem or combat, and that doesn't sit well.
The GM says no. Terminal Situations only occur when the GM says they do. Players who argue with GMs get to find new tables. The GM can kill any PC at any time. The rules can not prevent jerkwad players or GMs from ruining the game.
In a nutshell; Terminal Situations should be extremely rare; you are correct in that you can't knock out a SPNC with one shot (partially why they are special), and Garrett needs to think of another way to get Bafford away from the Scepter.
Terminal Situations occur whenever the GM wants. If you want them rare, don't use them. Special NPCs are special, again, for narrative reasons not simulationist ones. It is entirely appropriate for the GM to call this a terminal situation and let the PC one-shot the NPC either lethally or otherwise. That's what the cheating death rules are for.