If we assume a degree of personal freedom on the NPC's part, mental magic is the greater evil because it forces your enemy to fight the battle that, more often than not, you initiated. When I non-fatally burn, freeze, corrode, or otherwise harm my opponents, theoretically they have the choice to run away and avoid senseless slaughter. If they run, it's because they value their own lives. (Maybe I'm going to hunt them down and brutally end them anyway, or vice versa, but right now the survival instinct has been appeased.) If I charm, daze, or terrify* my enemies instead, they become slaves to my violent whims. I utterly disregard any personal bias toward peace and force them to kill and die.
Of course, I'm trying to inject real-world motives into a fantasy game. I agree with feo takahari; trying to carry your real-world code of ethics over into Geneforge is pointless and will make you crazy.
*EDIT: by "terrify," I meant "terrify such that enemy is unable to defend against my continuing attack" because that's how I use the spell.