While I find this view of neutrality to be broad to the extent of being useless. If you look to Eberron, it is a world that has GOOD and EVIL with capital letters. You have the Lords of Dust, physical embodiments of malefic ideals. You have the living nightmares of the Quori, and the walking terrors of the Daelkyr. Lycanthropy is terrifying because it can turn even the purest man into a vicious murderer. Among humans you have brutal soldiers of the Emerald Claw and crazed killers serving the Mockery or the Dragon Below, to name but a few. If you WANT a clear, black-and-white struggle between Good and Evil, you can have that in Eberron; after all, that's an important part of many pulp stories.
However, one of the key goals of Eberron was to support a broader range of stories than that - to allow the noir as well as the pulp. Furthermore, it was designed to take into account the existence and use of low-level magic. Which made it vitally important in my view that detect evil NOT be the one true tool that solves every problem. If you rule that only the most despicable, vile creatures or criminals actually possess evil alignments, you OUGHT to see societies arise in which paladins are constantly scanning for evil and imprisoning or eliminating those they find. If there's no possibility of an evil person doing good, or of being redeemable, and you had a concrete means of detecting these ruthless vile people at your disposal, why WOULDN'T you automatically use it? And how do you tell your murder mystery if detect evil will automatically tell you which of your ten suspects is evil... or that if it pings on two people, you might as well kill both of them?
Eberron's approach doesn't weaken the horror of true, pure evil. But it makes evil a SPECTRUM... and says that detect evil is a blunt tool that won't tell you where your target lies on that spectrum. I liken it to Star Wars, where Yoda can look at Luke and say "There is much anger in that one." It tells you that someone has the POTENTIAL for darkness, but it doesn't tell you if they've ever indulged it, or how far they'll go. It's a warning, a sign that the person you're dealing with COULD be a ruthless baby-killer - but there's no proof that he is.
As for the orcs, to me it's all a question of whether you accept the idea of pure, genetic evil. In Eberron, certain creatures ARE manifestations of evil. A fiend isn't just an alien creature that's decided to be evil; its alignment defines its existence, and if the alignment changed I'd expect the creature to physically transform to reflect it (as is the case with Radiant Idols, which have different stats than the angels they once were). In Eberron, the curse of lycanthropy sets an alignment, and if you are bitten by an evil 'thrope and surrender to the curse, you become not just evil but a vicious killer who revels in bloodshed. If you say that orcs fall into this category - that pure capital-E Evil runs through their blood and that every orc will unquestionably grow to rape and murder, than I think killing orc children is perfectly acceptable - because at this point they are monsters in every sense of the word, no different from demons. In Eberron, they're nothing like this. Orcs are sentient humanoids, nothing more, nothing less. They have different physical capabilities than humans. They have developed significantly different cultures than the primary human cultures. But they aren't INHERENTLY evil any more than elves are inherently chaotic good.
If all you're looking for from D&D is "I want to kill evil people and not have to think whether it's the right thing", hey, you can even do that in Eberron, using any of the groups I described above. And hey, if the orcs you meet are sprouting tongueworms and murdering babies for Khyber or wearing the flayed skins of human peasants, it doesn't matter that orcs as a SPECIES aren't inherently evil - these are people you need to stop. But for me, making both good and evil spectrums in their own right - as opposed to the extremely narrow end points on a spectrum that's 90% "neutral" - provides far more opportunity for mystery, suspense, and depth of story than "Everything that detects as evil deserves to die."
