He himself was captured. He was caught by our forces; his own forces were still very much intact and continued to fight even as he was in captivity. However, while he was there, he was convinced to endorse the US, rather than fight us, and thereafter...poof, no more war.
Our "demoralization" of the Phillipino people was more like "wholescale war crimes that caused them to retaliate in kind." In all fairness, they started the summary executions of prisoners and we only started doing that afterwards. Sure, we killed the hell out of them - but there were always more willing to fight until Aguinaldo said, "all right guys...screw it." After that, the Phillipine Army went through a succession of idiotic leaders who eventually had to give up altogether.
The point is, for a succsesful counter insurgency to work, you HAVE to have the support of the people. The reason the other leaders failed, is because they lost the support of the people.
To understand why torture is so fundamental to CI warfare, you have to remember that in guerrilla wars there are no battles, there are just ambushes. And an ambush is totally different from a battle. Let's say your squad is patrolling through a village just like it's done for the past two weeks, right? Everything's hunky-dory: the little old lady who sells veggies waves and smiles when you go past, the kids ask for gum, and you start to feel like a liberator. You're just turning a corner when there's a big boom and two of your buddies are on the ground screaming, two others are dead. You look around, where's the old lady? Where are all the smiling kiddies? A blast that big should've killed a dozen locals, but somehow the only casualties are your buddies.
Somehow the smiling locals magically disappeared two seconds before the IED went off. So either they all have some pretty effective ESP...or they knew it was going to go off. In fact, they were part of the set-up. The smiling kids, the friendly grandma, all a set-up to relax you, make you walk into the kill zone.
That's how torture starts. You know they know. They're weaker than you. But they won't tell you anything. You start hating them more and more. Sooner or later the idea of grabbing some of them and making them talk is going to occur to you, or somebody higher up.
If you've got good NCOs, they'll try to keep you under control, because you're likely to pick the wrong people to start whacking around. That's the nastiest part of the whole CI picture: the villagers may not be involved by choice. They may not want to mess with you at all. Most people, even crazy tribes like Chechens, just want to get by. But they have to deal with the insurgents, who are putting as much pressure on them in the nighttime as you are during the day. Maybe the little old lady's grandson is being held with a knife at his throat to make sure she goes to her usual veggie stand and looks cheerful, just to make the set-up more convincing. You can't know.
You'll never really know what's happening to the locals. Finally you get a decent tip, somebody snitches on an old enemy from the neighborhood, you go to his house and dig up a fully-functional RPG with a dozen rounds. Just think of the pure hate you feel for this guy: he and his little friends have been bushwhacking you for weeks without the guts to show themselves. Well, now you've got him. Not even your NCO can stop you now, even if he wanted to.
Besides, it makes good military sense to torture him. Like I've said a dozen times, the key weapon in CI warfare is info. You want names and addresses, fast, before another patrol gets blown up.
That's how most improvised, low-level torture starts: working out on somebody you think tried to kill you. Every CI force in history has done that kind of torture, and so do we. Duh!