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Just include that in your .ent file and your enemies will have a health value. "Killing" them only makes them glitch and continue their walk or run or idle animation forever, while they remain in one spot (they still drain sanity when you look at them). They still make sounds, but the active enemy music fades and they are non-solid and do not respond to the player. If I could get them to disappear entirely and be replaced by something else, that would be ideal, but so far no dice.

The monsters by default have that in the .ent files and set to 100. Yet GetPropHealth() always returned 0 for the monsters for me. This caused me to write my own monster health system. Since it doesn't rely on HPL2 to manage health, there is no apparent glitching of the monsters upon "death." There shouldn't be a problem when spawning a ragdoll version of the monster at the monster with AddAttachedPropToProp().

Also, Blender 2.49b apparently can't export armatures or anything else. I've managed to get the servant_grunt model into Blender and modify it, but it can't export to .dae format. I'm thinking of trying Maya but my hopes are not high (it hasn't been able to import .dae files without a bunch of errors either).

In Blender 2.5 i was able to import and export one of the static objects from Amnesia and have it show up in the level editor. Of course, the object had no materials on it, and i didn't feel like doing anything further with it after that point, though, so i can't tell you how much further you'd be able to get with Blender 2.5.