I wish they had dropped it. The idea of 'good and evil' doesn't really make sense to me. Many groups that are considered evil in real life think of themselves as good. Most gaming groups can't even unanimously decide where the lines are (hence the millions of 'the paladin in my game did this/should we reward or punish him' type threads all over the internet.)
Everyone has their own individual ideas of what good and evil are. Best to keep alignment out of the game altogether.
Then you didn't understand the 3E alignment system. Good and Evil were actual forces. It didn't matter whether someone "thought" they were Good or Evil (or whatever in between), their actions slotted them into one of those categories.
Really, this is the only way the system could ever have worked. There had to be a singular definition for each of the alignments, otherwise everyone would have their own interpretation of their alignment.
So a truly despicable tyrant very well may have honestly believed he was LG, but in reality was LE and recognized as such by the game mechanics.
Alignment systems work when you lay them out and tell people, "this is how it works." But gamers/people don't like to be categorized and view alignment as a straight jacket. In all my years of gaming one thing I've definitely learned is that most players want to be able to do whatever they want whenever they want, and many times they view the alignment system as getting in the way (when in fact, usually it doesn't but a novice DM tries to force them to behave a certain way rather than the right way of letting the chips fall where they may and having the PC deal with the circumstances after the fact).
Alignment should be presented as, "These are the various factions of the universe. Everyone fits into one of the them. Some fit into them better than others and some are close to the borders. But everyone is slotted in somewhere. If you care where you're slotted, then you need to pay attention to the particular ethos of each alignment. If you don't care, then you'll land wherever you land (and you may change during your adventuring career). Alignment is
not your interpretation of a particular ethos. Alignment
is, plain and simple. You fit into alignment, not the other way around."
If the game had made it crystal clear that alignment wasn't some system of interpretation that varied by the individual viewer, it would have worked better.
Alignment should be an overarching "aura" rather than something that dictates behaviour. It should be antecedent rather than precedent. And it shouldn't get in the way of the game. You shouldn't be thinking at the table, "I can't do that because I'm LG." That's metagaming and it's not the way the alignment system should work. You should do whatever you want your character to do and then it's up to the DM to sort out the ramifications of that, including consequences. The biggest problem with the alignment system is that you need an experienced and good DM to do the job right. Which, IMO, is a problem since there's probably a heck of a lot more bad/casual DM's than there are good ones so, as a result, the system is set up for failure.
I think alignment very much has a place in the game. How much any DM or group of players wants to use it should be left up to them. But it should be there for those who want to use it. The new system is a (IMO) crappy, "let's split the difference to make everyone happy" middleground.