When this situation arose in one of my campaigns, the party spared the bandits that pleaded for their lives, but made sure to break the bones in their sword-hands. Unfortunately, pathfinder doesn't have any rules for handedness, but in-game, I thought that it made sense. The former bandits, I ruled, would be incapable of wielding weapons in their primary hands (and since they could not use their primary hands, they would be unable to wield two-handed weapons as well).
A pretty fitting punishment, I think, along with indentured servitude (another punishment levied by the party against the former bandits).
Kicking in their teeth works, too, I guess... Hope they like eating peas.
You know, that option actually did very much occur to me. I was quite seriously considering rendering their sword hands permanently inoperable for a few minutes leading up to the next session of the game. If I were actually in the character's shoes and it was a matter of life and death, I would do just so without a doubt.
Honestly, I chose not to push in that direction after all of this debate. I've all hammered away at the issue a lot and I felt that more bellyaching on my part wouldn't achieve anything. The GM made a call and I respect that. More importantly, I think he made a very fair choice to allow all of the players one free alignment adjustment now that we've discovered and aired our differences. I understand the way that he and most other Pathfinder players seem to view alignments and right vs. wrong, so I'll make decisions with that in mind in the future. When the GM says "Ok, you can do that, but it will affect your alignment." it won't be a surprise to me.
Personally, I find the views on alignments that have been presented here a bit heavy-handed and lacking nuance. I suppose I never realized it before but I much prefer a darker, more complicated and nuanced "shades of gray" idea of good vs. evil. But as it turns out, I'm gaming in a much more "white hat", "black hat" world.