Sauron considered himself merciful because he beat Khamul instead of demoting him. However, he never offered Khamul a choice, he just assumed Khamul would make the same choice he himself made.

Well, whatever doesn't kill you makes you stronger, I guess. (Even if you're undead!)

And, obviously, even more reminiscent of Melkor's punishment of him, I see from this (as does Khamûl!)

Really interesting to see the after-effects of Gandalf's little "intrusion" here.

Another fascinating look inside the private lives of the world's most celebrated craftsmaia, and his undead crew. Khamul's relationship with his Master is very different from that of Angmar, but perhaps even more intriguing. And Sauron's punishment of him is very reminiscent of his own punishments at the hands of Aulë, isn't it?

Author's Response: I love the word craftsmaia. Not only is Khamul's relationship with their Master different from Angmar's, but Khamul has no knowledge of Angmar's UST issues, and Angmar doesn't know the extent to which Khamul sees his Master's thoughts. Sauron isn't aware of either of those things.