Below are quotes from my house rules Dungeons and Dragons Lite [with notes to explain the reasoning behind the rules]:
Characters die when their negative hit point total reaches -10 or one-third of their full normal hit points, whichever is a larger value. [This is to allow higher level characters, which tend to receive larger amounts of damage, a better change of survival.]
Opponents die when their hit points reach zero. [A monster at 0 hp is dead, and you don’t have to worry about wandering around the battlefield stabbing all your unconscious foes.] There are a few exceptions;
Exception 1 – When your opponent is a PC or major NPC (as designated by the DM). In this case your opponent dies when his hit points are reduced as indicated above for player characters. [The DM needs to allow certain powerful NPCs a chance of survival. The DM should let the PCs know if an opponent they thought they had slain is only unconscious.]
Exception 2 – When a monster’s description states that it doesn’t die when it runs out of hit points. [An example is a Vampire. If reduced to 0 hit points in combat, it automatically assumes gaseous form and attempts to escape.]
Exception 3 –When your character’s intent is to subdue and not to kill. [We are eliminating the nonlethal damage rules and substituting these rules that only apply to attacks with melee weapons or weapons that deal nonlethal damage.] You must declare your intent to subdue before making your attack roll. Subdual attacks do the normal amount of hit point damage until your opponent’s hit points reach zero. Damage from a single subdual attack cannot reduce your opponent’s hit points below -9. Your opponent will be disabled at zero hit points, unconscious but stable at negative hit points. This unconscious character does not loose additional hit points while unconscious and can heal normally. He has a 10% chance per hour of regaining consciousness naturally. If his hit point total is reduced to -10 or below for any reason, he dies.
If a character with negative hit points receives healing, he returns to 0 hp before any healing is applied. [In other words, he’ll wake up again with hit points equal to the healing provided by the effect—a cure light wounds spell for 7 hp will bring any dying character back to 7 hp, no matter what his negative hit point total had reached.]
A character recovers all lost hit points with one evening of rest (8 hours of sleep). [The official rule of 1 hit point healing per character level for each full night’s rest (or twice his character level in hit points for a complete day of bed rest) is more realistic, but changing this allows for less down-time between adventuring days and makes it easier to “hold up” in a cleared out dungeon room for the night and continue the next day.]