There are two Nathaniels! The real one in Kuldahar shouldn't be killed but the one in Dragon's Eye is a fake. In order to kill him you have to have returned to Kuldahar and talked to the real Nathaniel. Go back to dragon's eye and confront the fake and voila!
When you come back from Chult, all the remaining inhabitants gather around the area near the exit leading to Dragon's Eye from Kalduhar, they're not in the buildings you origionally find them in.
That makes sense, I haven't completed Dragon's Eye yet, couldn't get past where I was so thought that I'd go an pick up the Holy Avenger and sell some stuff.