Numerous calibration studies have shown that the 5 HD leader is below the reporting limit. There is a deuterated surrogate detect evil method, but it is 4th level and has a casting time of 20 minutes, so no one bothers.
Yet curiously, even trace amouns of evil react violently with smites and various spells.
Sorry, to me this just reads, "We don't want paladins detecting evil barkeeps any more, but we want them to be able to detect 6th level evil wizards." While I can sympathize, I do not agree. Too game-ish. Characters in game don't know how many HD something has... oh, wait, now they do, if it's non-neutral and has 6 or more HD.
They way I see it, you can leave the system as-is, meaning the paladin lives a difficult life in which he has to always wonder whether the barkeeper is going to poison his drink or whether he just uses the bartab to exploit his neighbors. Paladins understand that not everyone who is evil is a monster, in the sense of being an active threat who must be slain. They can just tell those who have made that final, precipitous lurch into being truly evil, beyond simple self-interest. This the Eberron system.
Or you can change things up and say detect evil now detects only supernatural evil. Not evil warlords, no matter how evil, unless they take a Vile feat or become imbued with evil power or whatever. Just Evil. You don't get an alignment aura unless you put on the Team Evil jersey. This is basically the Palladium fantasy system.
I think from a play standpoint, it's a problem that a low level paladin's foes generally do not ping evil, unless they are undead or an outsider, in which they probably do not need to be detected. For a paladin of level 1st-3rd, this ability amounts to little more than "detect evil clerics" and "detect monsters too tough to fight." Once the paladin gets to level 7-9 or so, now suddenly 90% of his foes are pinging evil. 5th level and lower foes who have actively evil intent are undetectable, but a 6th level foe who has actively evil intent can suddenly have such potentiality detected by the paladin.
Why is detect evil so sensitive it can detect actively evil intent, but not sensitive enough to detect 52+ encounters of standard difficulty in which an NPC acted from an evil standpoint?