It certainly still works for every other type of agent. I'm afraid I haven't tried it with Inquisitors in particular, but they'd be the exception, if they're immune.
I have to admit that I use this "exploit" not infrequently. I figure there are two ways to stop an enemy assassin; Stoop to my enemy's level and send out an assassin of my own, or send out a large number of soldiers to "scour the countryside", capture and execute the miscreant.
Only thing that makes it a bit of an exploit is that the AI won't do the same. Of course, if that's what makes something an exploit, then I guess we're all cheating by moving our armies in an intelligent and logical fashion, too! ^_^
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