Short answer: Death attack is sneak attack in regards to extra damage, immunities etc.
The paralysis effect only triggers if the target is flat-footed. Flat-footed is removed in combat and by some other abilities.
The long answer (pulled from NWN Wiki):
Type of feat: classPrerequisite: assassin
Specifics: At first level, an assassin may use a death attack, which functions similarly to a sneak attack in that if the target is not in combat they become victim to the death attack. The successful attack forces the target to make a fortitude save or become paralyzed. Even if they succeed with the saving throw they still suffer +1d6 points of damage in addition to the normal damage the attack caused. This damage increases to 2d6 at level 3, 3d6 at level 5, 4d6 at level 7, and 5d6 at level 9.
Use: automatic
~Nimrod