sometimes i let him choose another action with restrictions (movement at 1 x BMR, perception roll without malus, etc.).
That's the sort of rule i was considering house ruling Elessar
(nice to see another person with a LotR name)
The GM can rule it either way, both seem reasonable. Using your example of ..."the character is in melee combat. His action was some form of attack (let's say he chose Power Strike) By the time it's his turn all enemies in base contact are dead. There are still enemies around"
The GM could decide;
a) the character is surprised and spends the round assessing the situation
b) the character sees the NPC drop and is able to react and do something else.
I had a similar idea to you. I was thinking, if you cancel an action you may;
1) take a different action at -50 (with some actions the penalty won't make a difference because it's a mundane action requiring no roll eg. character takes a herb, drops a weapon)
2) character may move at BMR (or maybe half BMR)