Would you make the case that "altruism, respect for life, and a concern for the dignity of sentient beings" leads to complacency and stagnation?
Not in and of itself, but it would be a consequence of it. In a world where the struggle to live is not necessary anymore, where you don't need to be worried about someone is going to kill you because they want to rob you; or the lion and the deer can coexist together without the lioness never having the impulse of the hunt, and the lion eating those deer that have willingly given themselves so the lion don't starve, etc, you will eventually reach an state of complacency. There is nothing threatening you anymore, there is no need to fight, or to stress over something. Or to worry about something. You are genuinely happy with what you are and with what you have.
And complacency can lead you to stagnation. There is no necessity to evolve, or to strive to be better in a world where everyone accepts you for what you are. People will not deride you for your lack of skills, because they know that you did that mediocre work with your best intentions. And without that will to strive, eventually you get stagnated. And then, stagnation will become eventually in extinction. First of the self. There is no need for struggle when you have all what you ever need. Then, the extinction of life, as the lifeforms will not be able to survive whatever environmental changes occur in the future, as they have no will to adapt.
Muscular neutrals would see that as not a desirable outcome. Yeah, the world would reach an state of genuine altruism, where people is genuinely happy and able to perfectly coexist. But in that kind of world, that spark to better yourself, that struggle that allows you to live, and to be you, is no more. They may want people to chose for themselves if they really want that fate, instead of being "forced" to it by some cosmic force, no matter how altruistic that force is (and that force is not evil or desiring of harming living beings, but it's too impersonal to understand how the need for struggle can shape human (and nonhuman) lives). In this case, Evil adds that "struggle" needed to maintain the will of betterment alive in the self.
I don't remember from where I got this concept. I think it was from some stuff about Buddhism I read when I was young, but I think it was also influenced by the Wheel of Time finale. Nonetheless, I have applied it to my games ever since.