I don't think that you can use was here—at least not unambiguously.
Looking only at the sentence itself (because there is no other context), that's can either stand for that was or that is.
If it stands for that is, then adding was wouldn't be correct; nor would adding is be correct.
The use of the semicolon in this construction, and how the text that comes after it is phrased, is suggestive of two independent clauses. Except that the second part doesn't work on its own. (Which is why you think that was should be added.)
But I believe the sentence can be tweaked to clear up the issue:
That's how hundreds of men died: with their last sight on earth being a dagger's point.
I replaced the semicolon with a colon (an em dash could also have been used), making it clear that the second part of the sentence is not an independent clause. I then added with, as that better serves to define what came before, and used being to get around the problem with tense (because it works equally with either that was or that is).
Update: To more specifically address the question, I do think that some small liberties are being taken—but the question is if they are acceptable or not. It's a style choice to allow the second clause that can be considered incorrect in some strict interpretations.
Nobody is failing to understand the sentence, and modifying it will change its emotional reading, so it works at that level. You really can't know if you can omit such words in this type of situation. It's a matter of style and personal choice. (Assuming it's intentional in the first place.)