I think that RPGs would benefit from changing the 'moral' choice system to a 'personality development' system. You could have bars for the certain emotional dispositions of the character, and have buttons assigned to those dispositions for reactions during conversations. 'Evil' could be replaced by any number of more psychological traits, like 'sadistic', 'hate filled', 'rage-aholic' etc. For instance, you could just press the B button for anger in real time during a conversation and your character will respond accordingly. I also think that this can allow conversations to be more cinematice and organic, as long as you developed the system so that players reliably got the response that they think they're going to get.
(I could see it getting problematic though if the character gets angry at the wrong thing. For instance, someone could tell them that half the people in this one town were killed by the enemy, and the player might have hated that town so much that he wanted them all to die, but when he presses the anger button the character acts angry that they were killed at all.)
You could have more interesting combinations of personality traits this way. Maybe your character isn't particularly angry or hate filled, but is just greedy. Hell, maybe he or she is also compassionate, but greed wins out. If you have a plurality of emotional responses in a game that affects the player status, you can naturally build complex, three-dimensional characters instead of this linear division between 'good' and 'bad'.
Take Reaver from Fable. He is lustful, greedy, vain, and sadistic, which constitutes a certain kind of evil. But he's anything but hot-tempered. In fact, he's also kind of a coward, which could be another factor. But another villain that is also considered evil could be just the opposite. They could be hate-filled and bent on revenge, easy to excite, but also brave in the face of danger. Hell, they could also be puritanical. Think of the villain from Fable 2. He was a cold puritanical nut-job. In most traditional ways, Reaver is more of a villain than him, but he's the one you face, and Reaver turns out to be your reluctant ally.
You could also set these things as binaries as well. Binaries work fine if you have a lot of them. For instance, you can contrast greediness with altruism, lustful vs. puritanical, cowardly vs. brave, passionate vs. cold and rational. etc. etc. Even if some of them are false binaries, they will still make for greater gameplay depth. You can even have characters associate with those who approach them on the scale in one quality, but disapprove of the character's other qualities. That would actually make for complex relationships. Maybe Bioware does something like this, idk. I'd play their games except I'm just not a fan of the turn based action. The only one I did play was KOTOR. I loved the plot and the choices, but the gameplay just wasn't a turn-on.
