I always thought it was because, by the time they realized that the Hork-bajir weren't, you know, evil (even though Elfangor freaking told them and they just didn't believe him), they'd already killed a whole bunch of them. So it was sort of a defense mechanism. They dehumanized the Hork-bajir, rather than having to deal with the mental anguish of all the innocent beings they'd suddenly realized they'd killed. Of course, once the Animorphs were firmly in denial about the Hork-bajir being anything close to human, it was okay to go right on killing them.
But, yeah, that double-standard always bugged me. That it was okay to kill Hork-bajir but not humans.
However, I think their unwillingness to kill David stemmed, at least in part, from the fact that they'd already known him for three books at that point. He was an Animorph, however briefly. I'd imagine it would be much harder to kill someone you know than a stranger.
KA made David Rachel's demon, but IMO he should have been Cassie's demon.
I definitely agree with that. Especially given Cassie's tender conscience about other things.