As long as the LNs who wrote the laws or are enforcing the laws have a good explanation for their actions, I'm sure you can have a fairly tyrannical government. Plenty of societies use fear as a means to do all sorts of acts in the name of Justice and Good.
This won't spoil the plot in the book that Umbran and Mouseferatu are discussing because it is discussed right at the beginning, one plot you could have is the brainwashing of Evil (or even neutral) creatures to Good creatures. Ditto for the lawful - neutral - chaotic axis if that is also a problem.
A little bit over kill and a bit evil is the mindrape spell from BOVD. You could have a couple of LN's casting that and even editing each other's minds as they become too evil to bring them back to LN.
Personally this sounds like a campaign that might be better suited for 4ed when alignment is minimized or it might work better with the allegiance system from Modern.
Of course you could actually have a few LE's hidding themselves at the top and enacting laws that seem good but have horrible ramifications...
Now for the annoying problems of a totally 'good' society.
My favorite is the Nanny laws or laws where they try to govern people's actions when they can only affect the self. A modern example would be consensual crimes and thought police. Good examples would be found
here Plenty of those concepts would hit gamers hard....no loose women, no gambling, etc...
heck are the adventurers using government approved armor/weapons (seat belt/helmet laws?)
My next favorite is the extra step laws. Where they pass a law that sounds great, but it doesn't solve the problem because of all the hurdles placed in its way...extra forms, delays...basically anything that denies money. Good example of this is HMOs. I can see the government saying they will funding a 'healer' god to ensure everyone has the basic health coverage and then requiring extra paperwork for the cleric to get reimbursed for their healing. If the government does it right, the church providing the healing will get the blame for the lack of healing.
personally if you are sticking with the classic alignments, I'd have a few LEs hidden in the governemt structure that are causing all the headaches....
Oh and another thing...I assume you are not going for a medieval feel for every place. The modern concept of privacy is very different. As an example, it was quite common for entire family to sleep (and do other things) while the rest of the family was in the same bed. It is very possible that the average Joe in the society would have no problems with his neighbor spying because he believes in the concept of 'as long as you are not doing anything wrong, you have nothing to hide'
The reason I mention that is if you combine the consensual crimes with other activities, you could have the pcs break laws they didn't even know existed...and then have them faced with being mindraped so they never commit that sort of crime again.