Debatably, this post has [Mass Effect 2 Spoilers]. I trust you guys to know where you stand on my definition of spoilers at this point.
So, I recently ran into, I think, an effective handling of a moral quandary in an RPG. Dr. Mordin Solus is easily the most frustratingly morally ambiguous character I've encountered in a long time. And, I kind of want to call him out on what he's done. But he's party of my loyal BROhort, and what's more, he's a very loyal and *likeable* member of the Shepherd BROgade. He made choices of terrible weight, and he definitely feels them. I don't want to hurt the guy emotionally any more than I have to, but he has done some really bad things, and I don't want to condone those, either. Do I comfort him, by telling him it's in the past? Do I tell him it was wrong and demand some kind of enthronement? Is it better to be nice to Mordin, a friend, or to be honest with him, as a person who has made some despicable, if debatably necessary, choices? These options are both good and bad in their own ways, morally. I was honestly conflicted about the whole matter. What really made this work was that, quite frankly, I was more concerned with finding the option that satisfied me most, and not ferreting out the one that nets more Paragon or Renegade points. That's the sign that a morality system is working, I'd say.
Now, there's a slight caveat to all of this. It's worth mentioning that Paragon and Renegade are really more about "how nice are you" versus "how much of a jerk you are" than strictly "good vs evil." In ME 2, with the introduction of "Paragon Action" and "Renegade Action" quicktime event options into many cutscenes, Renegade is as much about being a dirty-fighting, sneaky SOB as it is about being a baby-kicking jerk. For instance, you get the opportunity to taze a guy repairing a gunship that you know you're going to have to fight (this isn't a spoiler, because it's obviously Checkov's gunship). Given the context, this seems to fall within "reasonable video game warzone immorality" - it's a little lenient, if anything, since unless I seriously misunderstood it, he wouldn't have died from the tazing. Hell, it might have saved his life (I don't *think* he was aboard the gunship later, though). It's the sort of move Han Solo would pull - opportunistic and kind of dickish, and also for the greater good. With the system they have in place, the two aren't mutually exclusive.
Where the system breaks down is in that I metagame too much. I can't help but optimize my playstyle to either Paragon or Renegade, since there are tangible rewards for doing so (more conversation options, easier resolutions of many conflicts between pairs of characters I like, etc). So, even though a particularly grandiose Krogan mercenary is blathering on about how he's going to kill and eat me, and clearly I'm going to be shooting him sooner or later regardless of what I do, I feel compelled to sit there and listen instead of shooting the fuel tank he's standing on, because I don't want it to come back and bite me in the ass when I need to tell two bickering teammates to leave each other the f*ck alone. And you still DO have to kick a lot of babies to amass enough Renegade points for it to be worthwhile (admittedly, when I say "kick babies," I really mean "say unnecessarily mean things to people who look up to you"). So, in Mordin's case, because I really feel conflicted about the whole mess, and because it can't be worth THAT many Paragon or Renegade points to say any particular thing so long as that thing isn't "Eat babies, regret nothing," I don't feel constrained by the mechanics of the system. I care about making the choice I find to be most morally acceptable (which was, incidentally, just keeping my mouth shut - I wasn't happy with this, but I couldn't come up with anything better than what the game offered anyway), and I'm willing to let the chips fall afterward. But I'll fruitlessly negotiate with people who clearly are just going to use that time to take aim because, later, I want to be able to tell other people to shut the f*ck up (very charismatically) and stop shooting each other.
Mind you, I'm not claiming that Mass Effect 2 has a truly functioning morality system. I still think morality systems are mostly a doomed effort. But, for me at least, it has instances where the system really does work, and I find that very interesting.
An addendum on the matter: maybe a two-part system, where you can set both an action and a demeanor? So, you could be surly but moral or charming but evil? Of course, I suppose this has the potential that leads to "shoot him in the dick [nicely]."