Is there a downside to slaughtering everyone I meet?

I was ambushed by a named enemy not long after jumping off the first tower and being unleashed into the vast world. I defeated him, and the game made a big deal about his death, awarding me Power and crossing off his name like I accomplished something useful.

Are there a finite number of enemies like this? Is there some downside to murdering him? Is there something beneficial I could have done with him had I spared his life somehow?

The number of enemies like those are infinite, though it can take some time till new ones show up.

When you kill a "nemesis", you are awarded with a rune. Those runes power up one of your weapons.

Naturally, a dead nemesis leaves an open spot in the commanding ranks. These ranks get filled over time. Certain other events also can fill up the ranks (like if you get killed by an, yet unknown uruk, he will be promoted).

There is no drawback in killing those. By killing them, you gain power and reduce the strength of Sauron's army. You also weaken the highest ranking uruks, the warchiefs.

Before you kill them, you should interrogate them (if you get the chance). They will spill useful information (like weaknesses of other named uruks). Later in the game, you will be able to even recruit them for your own purposes.

Warchiefs are pretty powerful and on the top of command. They control 2~4 named guys under them (captains). They also act as bodyguards. You won't encounter them on the map, they must be drawn out by having a dominated nemesis bring him out or completing a mission that will attract the warchief's attention.

EDIT:

After playing the game for a bit, I read that the more powerful a nemesis gets, the better the rewards are for slaying them. So, you can somewhat "train" them (by letting them kill you, for example).

Source:

Gamesradar article

IGN - Nemeses System

I've heard Shadow of Mordor compared to a Gardening Simulator. The Nemesis System is your Garden & the Runes are your Fruit. Gardening really kicks in when you move on to the 2nd map (via story missions) & unlock the "Brand" ability.

When a new Orc shows up in the garden:

• Identify him and add one level to his Rune.
• Die to him, giving him and his rune a Level. He also now has the Revenge flag, giving his Rune +1 bonus level.
• Threaten his life. +5 for Orc & Rune and a Bonus +1 for the Rune.
• When you've done the above, Brand him.
• Attend his recitals, erm, I mean "missions" & cheer him on. +1 for Orc & Rune. Repeat until the Orc is a ripe L20 with a L23 Rune.

When a Warlord has nothing but Branded L20 bodyguards (but at least one), it's time to harvest him. He will be replaced by one of his "ripe" bodyguards (+2 for the new Warchief's Rune for the final L25). Repeat as Required.

Don't leave a vacancy at the top. You run the risk of it being filled by an unripe and/or unbranded Orc. (such a waste..)

For completeness sake there is another +1 Rune Level bonus for using a Captain's Fear against him. FWIW, L26 Runes are identical to L25 Runes.