Well, if it weren't possible to be stuck in mid-morph, that would make way for loads of ways to 'cheat' the 2-hour limit. Suppose you were morphing wolf, and stopped it right before the morph was done (and if you were Cassie, you could make any human bits really inconsequential and inconspicuous, such as, say, a teeny patch of human skin on the wolf's stomach). Then you could remain in morph indefinitely!
Plus, the only real evidence for the idea that it's impossible to be stuck in mid-morph is in book #48 (remember the scene where Rachel is demorphing, the clock hits zero with her in mid-morph, and she keeps demorphing anyway?), but that has to be taken with a grain of salt since it may or may not have actually happened. And because it seems to contradict the scenes from books #3 and #20.
However, I think there may conceivably be a small 'grace period' during morphing, where the time limit is stretched. Keep in mind that even natural metamorphosis resets the time limit, right? So a 'partial' metamorphosis might at least stretch it, therefore while you're changing during the morphing process, the time limit is constantly changing too. Not by much, but at least a little.
Anyway, to go back to the subject at hand, I do think that trapping David as a rat was cruel. Granted that it would have been hard for the Animorphs to kill him, and I'm not sure that I would have been able to do it either, but that would have been kinder to him than trapping him as a rat. Although, the dolphin idea is interesting. They'd have to sedate him, but it could work. I believe in second chances, and if anything has a shot at changing David's view of the world, it's being trapped as an eternal optimist.