Dalton was used by Spike to try and find a way to return Drusilla to full health. Spike was obviously not very knowledgeable in such areas. After returning Dru to full health, Dalton helped in building the Judge.
Dalton was killed when the Judge burned him for his Love of Knowledge, which is characteristic of humanity.
Dalton was most likely sired by Spike because he knew information about restoring Dru. Dalton was probably beaten into submission from the beginning, making him rather submissive and weak. Dalton is always seen in his Vampire state, perhaps because he is insecure about himself, or has trouble turning into his human form.