Rorschach: Men get arrested. Dogs get put down.
Daniel Dreiberg: What happened to us, Rorschach?
Rorschach: You quit.
Rorschach: I'm not locked in here with you! You're locked in here with ME!
Rorschach: Dog carcass in alley this morning, tyre tread on burst stomach. This city is afraid of me. I have seen its true face. The streets are extended gutters and the gutters are full of blood and when the drains finally scab over, all the vermin will drown. The accumulated filth of all their sex and murder will foam up about their waists and all the whores and politicians will look up and shout 'Save us!' And I'll whisper 'no'.
Rorschach: You forgot how we do things, Daniel. You've gotten too soft. Too trusting. Especially with women.
Dan Dreiberg: No, listen, I am through with that! God, who do you think you are, Rorschach? You live off people by insulting them and nobody complains because they think you're a damn lunatic! I'm sorry. I shouldn't have said that, man.
Rorschach: Daniel? You are a good friend.
Rorschach: Watchmen. One of us died tonight. Somebody knows why. Somebody knows.
Dr. Manhattan: I have walked across the surface of the Sun. I have witnessed events so tiny and so fast, they can hardly be said to have occurred at all. But you, Adrian, are just a man. The world's smartest man poses no more threat to me than does its smartest termite.
Adrian Veidt: It doesn't take a genius to see the world has problems.
Edward Blake: No, but it takes a room full of morons to think they're small enough for them to handle.
Jon Osterman: Why would I save a world I no longer have any stake in?
Laurie Juspeczyk: Do it for me.
Adrian Veidt: It doesn't take a genius to see the world has problems.
Rorschach: Never compromise. Not even in the face of Armageddon. That's always been the difference between us, Dan.
Edward Blake: God damn I love working on American soil, Dan. Ain't had this much fun since Woodward and Bernstein. Congress is pushing through some new bill that's gonna outlaw masks. Our days are numbered. Till then it's like you always say, we're society's only protection.
Dan Dreiberg: From what?
Edward Blake: You kidding me? From themselves.
Answer: He has spent years as a costumed vigilante despite the fact that it was illegal. He has a very strict idea of what is right ("never compromise") and has proven himself incapable of doing otherwise. So no, there was no real chance of negotiating with him - Rorschach himself made it clear he'd have to die if they wanted his silence.
Garlonuss ★
Death was not the only choice. Doc M could easily have teleported/banished Rorschach to Mars/anywhere secluded in an oxygen bubble. He could have spared his life and just made him mute or manipulate his brain chemistry/atoms to remove the memory of what happened. The point is Doc M is all powerful and could manipulate matter at his whim; death was just a plot device creating a chance of an emotive martyrdom/sacrificial ending.
Ethically speaking, exiling him to Mars or erasing his memory of the event can be considered just as cruel as killing him, because then his agency is being taken away from him. Rorshach's malcontent with the situation poses a problem for the other heroes, and since Dr. Manhattan isn't willing to let him tell the truth of what happened, he obliges Rorschach's demand that he kill him instead.
Phaneron ★