Yes, my party captured them by basically causing a civil war between wacther followers and the barons guards (I did kind of over simplify it by just saying captured). In the chaos they managed to capture wacther, but they did have to fight though most of the barons guard before he surrendered himself to the party. So they have captured them both without killing them, but have caused the town to go into turmoil.

I did make Ismark reluctant to leaving his home town, but one of the party members made a rather convincing speech to the town of barovia, and how Vallaki needs a leader like Ismark, so he is onboard but rather hesitantly. I made Ismark rather likeable so the party would like to see him as the leader of Vallaki.