Still trying to understand your take on this... it seems like you're saying he was defeated until he perceives that his attacker actually means to kill him, and then he becomes undefeated because he didn't really mean it... ;-)
Why would he ever assume that his opponent -wasn't- trying to kill him? Not a healthy state of mind to enter combat in...especially against MKMs....
Are you running this as an unrelated action to escape? Changing the objective? What if the winning attacker isn't through yet, can he keep the character from changing the objective?
It still seems like this attempts to 'survive' and stay alive by running away should be attempted before reaching 0 AP. By that time it's too late. A lot of this sounds like it's intended to be an 'escape hatch' to allow the character to escape death when defeated.
Sorry if I'm belaboring this...I want to make sure I fully understand before running a group that might want to...um..."discuss" this aspect of the rules.
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