Yes,
After the 1st and even the second war I will always show mercy. I will let them keep some remote outposts after I have taken everything I am interested in.
I think showing mercy is not for the weak, it has to be given to the weak. And then it is a true sign of power and greatness of my civilization and my enlightened rule.
BTW: it would be nice if like in SMAC there was a total surrender option where the defeated civ is becoming a kind of vazal state.