I'm not sure if this has been posted before, but if the oxygen system has been destroyed and the ship is completely devoid of O2, the achievement will unlock -- even if the last remaining crew are kept alive by a lvl3 medbay.
As aside, that was a complete stalemate. I could have beamed over and killed them, but my boarders would've died from no O2 -- the AI is quite content to stay in the medbay indefinitely.