Yea, looks like I'll end up having to use that method. Just started playing around with it a few days ago. It's interesting trying to compress the openness of a D&D adventure into a point to point linear quest line..
It seems that 'Guard' encounters will only act hostile to a player when they are set to 'fight to submission' However it seems that you can later change the encounter to a 'Monster' race and for the most part the costumes don't change. So you can make Guards with I assume would be goblin or some other ai setup. I don't…