Ok, I can't post this in the WotC due to firewall.

Based on Rakghoul Disease's wording, it appears that all the ghoulie needs to do is defeat an enemy.

R=Rakghoul
B=Self-Destruct piece

RBB

If the Rakghoul defeats the Self-Destruct piece adjacent to it and it in turn triggers the other self-destruct piece to self-destruct, then only 1 new Rakghoul is created because the Rakghoul only defeated the first SD piece and the second piece was defeated by the first SD piece, correct?

Changing the scenario:
M=MTB
V=Vractyl Wrangler (VW Bug)
Rd=Rakghoul with Doglith courtesy of Nom
E=Enemy characters with <20 hps (ex.:Camaasi Nobles)
X=squares

MxxxVxxxx
xxxxxxRdx
xxxxxExEx

I am not sure that this translates well so to be precise, think of a Nom Squad with a MTB engine. The Rakghoul is Doglithed so to gain stealth. The VW Bug is there to ensure that the Rakghoul has SD capability. During the initiative phase when the Rakghoul is sacrificed to the MTB, its sacrifice triggers the Rakghoul's SD. This SD defeats two enemies, thus this would create 2 new Rakghouls since the defeat by SD is from the Rakghoul. Is this correct?

I think you are getting confused in how the pieces are defeated. A piece must be defeated from being attacked by the Rakghoul in order for a new one to spawn, as the new piece comes as a side effect of the 'Rakghoul Disease' ability, which is only triggered when you hit a living enemy.

So, in your first example, if the Rakghoul swings and hits the first target, killing it, then yes, both SD20 bombs would blow up, and then you'd be left with a new Rakghoul in place of just the character that you attacked.

In your second example though, you would not get a new Rakghoul at all. Neither of the 'E' characters were defeated by the Rakghoul. They were in effect defeated by Nom Anor and his Commander Effect. More specifically though, they were not defeated by an attack from the Rakghoul.

That's how I was approaching it but wanted to be sure as to the meaning "Whenever this character defeats a living enemy." I wanted to make sure mass produced Rakghouls aren't a possibility outside of actually attacking.

Thanks for clearing that.