One counterexample -- though I agree with most people, including Lela, that the paladin shouldn't permanently lose his powers or anything like that, but should get a warning or penance-style task, without losing his powers:
If you argue against taking away people's powers because they only control one person and it would ruin the game, that leads to a couple of potential problems. This is the same line of reasoning that results in DMs never killing PCs, and players making stupid decisions and effectively holding their PCs hostage because they know the DM won't kill them.
I support reasonable challenges to the paladin on a moral basis, just like I support challenges to every cleric's faith (and in game, I use this to balance the otherwise overpowered cleric). I don't put paladins in no-win situations, and the usual understanding is that, if the player and his paladin think hard about their choice, whatever they do will be good enough to keep their deity's love and favor. But I will without hesitation smack down (in the form of penitential duties, temporary loss of some powers, and EVENTUALLY falling from grace) a PC who I don't feel is taking his paladinhood seriously (provided that I'm running a roleplaying-strong game).
It all depends on the game. If you run hack & slash for everyone else but give the paladin moral issues, that's no fun. You've got to be fair -- which means moral issues for everyone.
Get the monk and the bard arguing over criminals convicted by an outdated legal system! Watch the party try to bypass an organized bureacracy. See if the bard starts getting too lawful or the monk loses his disciplined edge. Remind the barbarian that the primal power that makes him deadly in combat also makes it really unlikely that he'd hold his temper while women from his home village were being held in chains (as slaves in a law-abiding society).
In other words, if you have mature adult players, make it a complex game.
(Not saying this to Lela, by the way -- it sounds as though she's doing a good job on this already)
-Tacky