Interesting stuff about the moral quandaries we can thrown into the game.
To me however, after experimenting with different systems, D&D is not a system that will best uphold games where profound human emotions are to be explored. You can certainly get away with it, but I doubt that it's the best system to get there. D&D is a heroic fantasy game (though one might argue about grittiness vs. heroics) that includes many abstractions, such as hit points and lack of a wounds systems, that keep the game at a relatively superficial level. You get a spear driven in the gut? Should this be a suspensful moment? No, you simly take 10 damage out of your 40 current hit points. Game on.
Also, the D&D alignment system is probably more interesting to set the scene for epic good vs evil battles, where virtuous paladins lead their bethren into battle against vile demons, than to try to push the players into moral dilemnas. Moral dilemnas are already challenging in themselves, if you add to that an alignment system on which not everyone agrees, and honestly that is likely to simply fall apart upon sustained scrutiny (tell me that a paladin that kills creatures because of their race, even the likes of goblins, is good...? But I don't want to go into an alignment debate so I'll stop here), you get a very complicated situation where players are likely to feel uncomfortable. Not in choosing a course of action, but in trying to determine how his chaotic good character should act in such or such instance. This is where a player needs to overthink things. Where alignment discussions spring out at the table; "ah, but you're chaotic good, so you should..." (Don't you just hate sentences that start with "so you should..."?). You loose what's good about role-play to fall into game theorism.
D&D is, at its core, a game where PCs will kill things and loot their stuff. Don't get me wrong, I'm a very subtle RP-er

But the system is biased towards a playstyle. And I love it that way. Moral quandaries are not out of the question. But I agree with another poster that I'd leave them as background instead of basing the adventure around them.
(All this from a DM that actually has paladins as radicalist zealots in his homebrew game world.)
As for your other question, you know, the OP

I'll be looking forward to reading the answer from the wise and talented people around here. Here are a few thoughts from a DM who is quite humble, but with a few decades behind the belt nonetheless:
- less dice rolling is often better
- mood and ambiance are key
- i like dark ambiance games, players put the light-hearted tone into it anyway, I'm the keeper of balance that makes the game both funny and serious
- i make up more plot twists on the spot that I'll ever admit at my table. What's cooler than a player's face that illuminates during play, when he (thinks that he) discovers a major plot point (that I had not anticipated at all)? If I feel that his discovery tells a cool story, you can be sure that i'll steal that plot point and incorporate it into the game on the spot.
- I roll dice on the table for all to see.
- I really hope that the PCs will win. Really, really, really. But when the fight starts, it will go where it will go.
- I play NPCs and monsters with a twist, especially during battles. They'll rarely act in a very calm and calculating mind during battle. I figure this is a highly emotional moment. It's a life and death situation. They'll act according to their overarching motives. They'll flee the battle scene and abandon their comrades. They'll focus on one PC because they want vengeance against him. They are emotional beings and I play them as such. Their decisions often wont make sense.
- The PCs are the heros. The players need to feel it. If the story tells itself without their intervention, or if they are railroaded towards an end that was going to happen anyway, to me, the players won't feel that their PCs are heroes.