It still deals slashing damage but it doesn't do lethal damage while the enchantment is active. The blades magic turns the cuts into nonlethal but otherwise it works the same. As to removing a head I would have to say it shouldn't be able to sever body parts while the enchantment is active.
Merciful weapons Link can be turned on and off.
While on, it deals an extra d6 damage and all damage dealt (including str, sneak attack, flaming, ect...) is non lethal.
Bit with a command your can turn it off amd start dealing lethal damage (without the bonus d6)
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Slashing weapons have no restriction for non lethal damage as stated above. It is the same effect to deal NL with a mace, a club, a spear, or a scythe. Certain weapons are easier because of feats, Bludgeoner for one makes blunt weapons function with no issue.
If you are looking for flavor as to how it works, that’s always an issue I run into as well. It’s harder to describe how the 20 slashing or piercing dmg is not lethal.
Magic, somehow the magic makes what would be a lethal blow into a non-lethal one.
There's this idea that nonlethal damage must be bludgeoning. That isn't how it works. Attacking nonlethally with a longsword still deals slashing damage--it's just nonlethal, presumably damaging less essential parts of the body or making shallow cuts. Attacking "with the flat of the blade" would be using the longsword as an improvised club.
Similarly, a +1 merciful longsword, when active, deals nonlethal slashing damage. A coup de grace with an active +1 merciful longsword would deal a whole lot of nonlethal damage and force the victim to make a Fortitude save to avoid immediate death. At that point, sure, cut off their head, etc. They're still dead.
