Arravis and D4:
So what? D&D is not supposed to model real life. In the D&D system, Evil is a real and tangible force, as is Good, and to a lesser extent Law and Chaos as well. In addition, just because you can understand a villians motivations doesn't mean you should forgive them for the suffering they cause. As for the Kobolds, as mentioned, they simply have not had the capacity to harm the town yet. Once Calcryx begins to grow in power, or when the goblins are removed, the likelihood of them threatening the town grows exponentially. Given their proven Evil natures, it is the Paladins duty to eliminate them.
Paladins have Diplomacy so they can be leaders, not social workers. Heal and Lay on Hands is for saving comrades fighting against Evil If a Paladin starts using those abilities to save evil creatures, he is acting against alignment in all but the most extreme circumstances.
S'mon and Wizardru:
Actually, I think that plenty of people and creatures would fall under my definition of Evil in a D&D world. Perhaps you could give an example of a character that would be Evil by your definition, and not mine. We seem to have reached an impasse on Scrooge. Perhaps you can use NE or CE creature who is less than what my view terms them as, since LE is the least reprehensible of the Evil alignments, simply because it is selective Evil.
I do not think the Paladin has violated the Lawful section of his alignment. He made a temporary truce with the Kobolds, and now after having completed his primary mission has to decide what to do about them. He has analyzed the situation and their inherent natures, and is taking action based on that. He plans on confronting Yusadryl openly, and only if she refuses to acede to the neccessary actions he must take in regards to the Dragon will he attack her and her tribe.
