Regarding helping players with personality development:
A DM I played with would make us develop personality quirks for our characters (e.g. avid knitter, wanting to be a hairdresser, a pet goat, accents, a fear of water, compulsive lying, etc.). In conjunction with alignments, I've found it works well.
In particular, it helps quickly add flavor to new characters before they have a chance to accumulate depth from campaigning. It also helps you think about how your character is atypical -- in contrast to alignments, which help you think about how your character is typical. You just have to watch that the players don't start leaning on the quirks too much.
He also had a page of suggestion questions such as "what's your character's favorite food?", "if your character were a movie star, who would it be", etc. I think I've lost the sheet now, but you get the idea.
Anyway, it's my experience that when players spend time trying to develop a personality for their character and end up with alignment caricatures, it's because they confuse history with personality. They spend effort figuring out what happened to their characters, but don't really flesh out how their characters act and feel and think and speak. So when it comes game time and they have to do those things, they have to lean on the alignments since it's the only bit of the personality that's really gelled.
Regarding Alignments:
I don't know the Palladium system, but I've been tossing around an idea for a while which involves combining elements with alignments:
Physical -
Fire (heat, flames, quickness, temper) / Water (cold, water, malleability)
Earth (rock, metal, earth, solidity) / Air (air, wind, sound, flight, etherealness, weather)
Mental -
Truth (light, divination, telepathy, understanding, sciences) / illusion (darkness, illusion, fantasy, charm, art)
animus (nature, animal, plant, wildnerness) / artifice (technology, constructs, civilization)
or
mana (energy, magic, enchantment, lighning) / void (emptiness, abjuration, planes, dispel magic, enervation)
Spiritual - (you're familiar with this one);
order/chaos
good/evil
Anyway, each of the alignments has associated spells, abilities, elemental creatures, and personality implications. Implementation isn't too tedious/difficult. I'd suggest player characters only have a spiritual alignment, but they can have mental and physical tendencies for the purposes of developing character. Other races may have physical and mental alignments (for example, some fey may be animus/illusion, or standard fire elementals would be fire elementals, etc). Adding the mental alignments means coming up with new spells/items/creatures or declaring that existing ones are aligned under the new system, but it means you don't have to worry about changing and rebalancing existing ones significantly.
As an example, a chaotic good character that has a truth and animus tendencies might be about life, independence, being true to yourself, appreciating the existing world without trying to impose an artificial order on it, etc. Whereas a chaotic good character that tended toward illusion and artifice might be more about storytelling, fantasy, unpredictability, disguises, etc. Chaotic good and air might be a daredevil who loves going fast, feeling the wind on his cheek, and watching tornadoes. Chaotic good and earth might be fascinated with exploring underground passages, geologically active regions, and learn stoneshape. Anyway, the exercise of thinking about the how the character tends in the other alignments can help add complexity to the character. I started exploring it mostly from the magic stand-point, but this reply is already so long, I think I won't go into that here. Hope this helps.
