Kill them all, let Pelor sort them out
If you think about medieval times, people were not exactly the loving, tolerant people that are around today. They burned human beings they thought were witches, treated people of other religions horrendously, and god help anything that resembled an actual monster.
Yes, that was often true. But also, in some countries, there was tolerance of other religions.
In christian lands, during medieval times, yes, it is true that generally, people of other religions (including people who practiced a different version of christianity) were forced to convert to the mainstream version of christianity, and if they refused, they were executed (often tortured before execution), or exiled if lucky.
However, much of the medieval islamic world tolerated christians and jews inside an islamic country (as people with similar beliefs) - but when the muslim armies were at war and captured enemy soldiers (and often civilians), they killed them, ransomed them or enslaved them (and sometimes tortured them). But if those christians and jews who they captured chose to convert to islam, they were sometimes (or often? always?) spared.
It was common for invading armies of the time (whatever their professed religion) to rape and massacre civilians, and even the "holy" christian crusading armies did this type of thing - killing everyone in the city of Jerusalem when they invaded, for example. In contrast, the muslim leader Saladin got his army to spare much of the population of Jerusalem, and sent a platter of fruit to Richard the Lionheart when Richard was sick... and for actions like these, Saladin won a reputation of chivalry, even in the eyes of his christian enemies.
During the Mongol invasions, the Mongols killed perhaps millions of captured soldiers and civilians, and enslaved many, too. However, after the conquests, all religions were tolerated, and torture was banned. Also, Genghis Khan, who united the Mongol tribes, and led the Mongol invasions for many years, owed much of his success to a policy of sparing his defeated enemies, as long as they joined his army, and/or gave tribute to him.
I don't know so much about other parts of the world - but certainly, in many feudal or slavery-based systems there was plenty of cruelty, like in those parts of the world that I described.
So, we can see that the real-life medieval world was quite complicated and varied in cruelty and compassion.
I daresay, we can apply a variety of definitions to "good" and "evil" in medieval-type RPGs, depending on the preferences of the DM and players. Although many people were cruel in medieval times, this needn't mean that "good" people are cruel in medieval-type RPGs. Indeed, cruel acts and cruel people like those I described above, could be classed as evil, even if they are common in a medieval world. Such a culture in the game would make any heroic acts, e.g. by players, that much more special.
