You can kill the merchant at any time in the game. Under the normal difficulty setting, he just dies then comes back at the next place, or when you leave the room and come back in. However, under the professional difficulty setting, once he dies, he remains dead. When you see the merchant and his eyes are glowing red, you can take the mine thrower and shoot a couple of darts. Most of the time he will turn into a blood stain on the floor.