The type of game Scott suggests can be an excellent game. I like trying to understand how the game hold together, so that if you change one theme of the game, you adjust the others so that the whole thing is philosophically coherent.
Having said this, D&D seems to me to be rooted in the amorality of pulp fantasy, like Conan, where "might is right" or of the Grey Mouser where "if I am cunning enough then I deserve to win". The alignment system has NEVER made sense in this light, at least not the good-evil axis. It also doesn't make much sense when put against the game's central premise; killing monsters and taking their treasure.
Here is how I have always reconciled this, at least in some of my games, because in fact, I LOVE moral ambiguity, dilemma and choice.
Law and Chaos, Good and Evil; For any of these things to really exist, there must be choice and free will, as well as intelligence.
Just because a being is intelligent does not mean it can choose or that it is not still an animal. If a being is intelligent but so driven by its base animal nature that it can barely resist its instincts then it cannot make moral choices in the way that most of us can.
An orc in my game is not evil; it is a shark and driven by a lust for savage slaughter that it can control no more than the predator from the deep. It is dangerous, murderous and it must be destroyed or else ruin will follow, but it is not evil; just a tortured thing consumed by blood-lust. This IMHO is how Tolkien wanted us to view Orcs. They cannot be reasoned with to any great degree, because their instincts and base nature are too strong and fear will keep them away only for so long, so they must be slain.
This is why I don't like my savage humanoids to be anything other than savage, because once they are no longer base and lustful, they can choose just as we can and can no longer collectively be lumped as dangerous and slain without thought. If I want this to be the case then I design the creature specifically for morally vague games for the purposes of dilemma.
This is a matter of degree; even humans are ruled by lusts and so their choice is also not free choice, yet we can decide to change our nature because instinct is not so strong. The fact that evil is an easier choice than good is in fact what makes doing good a sign of inner power. The same is also true, to some extent, of law and chaos since thermodynamics tells us that all natural systems tend to complete disorder, so law is the harder choice.
D&D is moving in the right direction; the monsterous humanoids should be like savage animals or else we risk having to ask if they are good or evil. And once we do that, we are in a different game. It is a game I love to play, but I don't think it is the core D&D value.
