Buckle down, this is going to be a long post (maybe multiple parts, even). I love morality systems in games. I think the first one I ever experienced was in Star Wars: Knights of the Old Republic. What a great game that was. If anyone is unfamiliar with the game play element I'm talking about, a morality system in a game is put in place to give you the option to choose what your character will do in most situations, usually a "good" choice and an "evil" choice, which will then (ideally) effect some aspect of the game down the line. Whether that means certain characters will ally with you or certain abilities will become stronger depends on the game, though in a good one, it will be both. This kind of game design, if implemented properly into an MMO, could be great (or, conversely, awful).
Before I get into how this could be implemented, I would like to discuss a few of the pitfalls that I have noticed in this game mechanic as seen in the games I've played. The major sticking point is that once you start down the "good" or "evil" path, you almost feel obligated to continue making that same type of decision because the greatest rewards from the game come from being the most good or evil. Yahtzee Croshaw put it best in his review of the first Fable game (which I played when it was released, enjoyed, but ultimately found a little too shallow and lacking in real choice) when he said the player is forced into mawkish virtue or extravagant malevolence (that guy has a way with words, to be sure) and really, that's the crux of it. Instead of making whatever choice you feel like making (or, if you're truly immersed in the game, the choice you think you would make), you choose the good or evil option since that's the way you've gone so far.
Now, in Knights of the Old Republic, this is presented as making yourself align more with whatever side of the Force you wanted to go with, so that makes some sense in that context, I suppose. But take Jade Empire: here is a game with an extremely similar structure to KOTOR but set in Asia (I think China, but I can't remember and I don't often bother to fact check). In this version, the two sides are presented as the "Way of the Open Palm" meaning you are helpful and giving to others and the "Way of the Closed Fist" which, as it is described in the game, means that you are in business for yourself, so a self-centered opportunist to paraphrase their verbiage. Unfortunately, while the Open Palm seems accurately represented, the Closed Fist options often have you going out of your way to be a douche. In my experience, it's actually much more trouble to kill a peasant and burn down his village than it is to simply ignore his pleas for help because you have better things to do.
If it were up to me, I would have added a third option, the "Way of the Middle Finger" where you get stronger for being an unabashed jerk and leave the Closed Fist options to be that of true self interest. For example, a peasant would like help because a demon is threatening to kill him and his family. You have a few options: 1. you can help him and kill the demon, hoping there will be some nice loot from the demon's cave; 2. you can offer to help him only if he can pay you; 3. You can ignore his request and loot the demon's cave while he's murdering the peasant family or; 4. you can kill the man and his family, then kill the demon and leave all their heads on stakes in front of the peasant's house you burned down (after taking all his money) as a warning to others who might seek your help.
As you can see, there are 4 options there, each with a different result and each at different points on the moral compass. The good is obviously good, the bad is obviously bad, but in the middle are a light grey and a dark grey. Sure you help him, but you expect money in return. Sure, you didn't kill the peasants, but you let it happen when you could have stopped it. This kind of choice, to me, would be much more interesting and varied. If this could be done on a grand scale throughout the entire game, we may be onto something.
This is getting long, so stay tuned to Part 2 where I will discuss how this could effect character development and then Part 3 where I explain how this could be worked into an MMO setting.