The way D&D defines alignment, it outlines a fairly absolute set of guidelines for each alignment, and states while there is some wiggle room, there isn't much. The example I gave of the cleric who sometimes tortures and persecutes those he thinks are "corrupted" would be defined as LG in some cases, and LE (or LN at best) in others. D&D has a hard time classifying people like this.
That IS the wiggle room! That in itself is the variation and dynamics that makes Alignment compelling. That a character can do actions, and the PC's have to figure out if it's Good or Evil or what...that kind of conflict just doesn't exist in a world without alignment. The PC's don't CARE if it's good or evil or what, because it doesn't matter. Torture babies and summon devils, you can still be as good and freedom-loving as the next person.
There's a LOT of wiggle room...Alignment is a label for a broad sweep of behavior, not something you can't move out of. The fact that the game has trouble classifying it means that the PC's have trouble classifying it and THAT leads to some interesting interaction because they have to dig deeper.
You always have to dig deeper with alignment. To find out the origins and the core beliefs of a person. You have to find out how they see the world, and then compare it to how the icons of the alignment see the world -- Alignment is far from shallow.
PCs get the mindset of "we are rightous and just, and anything we do to fight evil/chaos/whatever opposing alignment is justified." To me, that is lazy thinking, and viewing everyone on a good/evil or law/chaos axis and not as people is overly simplistic. IMC, when PCs meet someone, they aren't ever quite sure of alignment, but have to deal with the person as an individual rather than a pre-ordained set of beliefs.
See, if PC's start thinking like that, then they are no longer righteous or just...it's up to the DM to shift their alignment accordingly. It doesn't matter what they think they are, it matters what they do and believe on a grand scale. If it looks like a duck, walks like a duck, quacks like a duck, but says it's a dog, that doesn't make it a dog. Just because a player decides he's Good doesn't give him a license to do wicked things to beings becuase they're Evil.
The axis does not mandate this simplistic view...certain player/DM styles do. The existence of an axis does not presuppose that everyone knows where everyone else lies, nor does it give inherent justification for actions based on where they lie. Just because something is Evil doesn't mean the Good Guys kill it.
I use alignment, and my players still must deal with the person as an individual rather than a pre-ordained set of beliefs. Hell, they still have to deal with fiends as individuals. Nothing about the exitence of alignment says that just because something is evil, you can get away with killing it, and, indeed, must kill it. It's merely a label for a way of life, and that doesn't mean that it will nessecarily work for or against the PC's.
I use alignment because it adds that solid dimension to moral struggle. It means that the PC's can wrestle with concepts in a world that is absolute, and try to place it, and have their own beliefs and place in the world hinge on that. It means they care about the morality and motives of others, and their own.
Nothing about that is shallow, an easy out, unrealistic, or overly defined. And I take some offense to people telling me that my way is worse for it, when, in fact, it's NOT. If it WAS, I'd have ditched alignment long ago like I wanted to do in the first place.
Heck, I like alignment so much, I'll probably overlay it onto d20 Modern, and AU, and others. It's good. And it adds a dimension that assuming relitivism cannot.