Is it considered appropriate to fd rather then subdual the above races? I have seen both happen, and would like DM clarification.

As stated in the first and second announcement about Goblins/Kobolds being available without applications, being monsters is a valid reason to kill these races in PVP. Nothing requires you to kill them; if it would be In-Character for you to spare a goblin or even do business with it, that's your character.