I agree with the OP. I read a bunch of the posts here, but not all. So if what I'm about to say has been said...whoops.
I like the idea of no morality bar, but people just reacting to you differently. For instance: If I walk into a town and shoot some dude in the head, The people in that town would distrust, or even hate me. No matter if I was super good somewhere else, they didn't see that. They saw me shoot some guy in the head for no reason, therefore I'm a bad man to them. Prices in shops would go up, I may not be able to eat at a certain place or sleep in a hotel or whatever. Police/guards would follow me around in case I did something bad, etc. People would just ACT different if they knew I was a terrible murderer.
That being said, I don't like the 'universal karma' thing either. IF I'm an ass in one town, and I go immediately to another town, how do they know I was an ass? If it's a slightly modern game, it's a communications thing, but most of these games (Not all, but most) are medieval settings (ish). So how does THAT work?
I do agree that games are getting more and more real in that the NPC reactions can really sway your outcome.
One in particular from Mass Effect has stuck with me for a while (Sort of spoiler, so keep that in mind as you read): When I was going through Saren's compound, I ran across his Asari secretary. She begged for her life, and even opened the way for me without a second thought. Now, at the time I was purposely playing as a straight renegade (2nd or 3rd time through the game), so I opted to kill her. But the dialogue I went through to get to that point...she was BEGGING for her life, PLEADING for me not to kill her. I did it, but watching my character shoot her made me actually not like my character. MY character did what I told him to, and I hated him for it. Needless to say, I found it hard to continue my 'renegade' style of play after that moment. I didn't like what he was becoming. Bad-ass quips and one liners and shooting a drug lord in the head is one thing...but this woman (Sort of) was innocent, really...it was cold.
In the end, I think the mindset of the game denizens chooses what right or wrong is, and I think it would be even cooler if different towns had a different set of moral values. One town is all about eye for and eye, another is about forgiving, another settles EVERYTHING with fights to the death (Or something), another has a supreme judge that judges everything and chooses what is right, etc. THAT would be awesome. Then one town might love you for killing that jerk, but another town would like you less because you didn't follow what THEY view as good.
Anyone want to pay me for THAT idea? You saw it here first...I hope!