Can a hermit be evil if he's never exposed to people? Must you "commit" an action to be "evil"? Certainly just thinking selfish or destructive things isn't evil is it?
It's a bit of a grey area in D&D, to be sure. Intent has a bearing on alignment but it seems that action is the "trigger."
So, no, a hermit who thinks evil thoughts and never commits an evil act cannot be evil.
He is well on the path, however, since an evil intent is required for an evil act. So he might not be evil yet, but he's just looking for an excuse to do it.
The reason I ask is that I'd like to have an encounter where the paladin is encouraged to "detect evil" and finds several peasants minding their own business, who've never committed a crime, who aren't hostile to the paladin or his religion, but who are evil.
Crimes aren't inherently evil, of course. But perhaps being a peasant is...they could all have D&D-style Evil societies, where they need to do things like bully and murder on a daily basis just to live as part of the society. They could be planetouched or the like, with diluted bloodlines that hint at evil ancestry. They could worship an evil deity, perform blood sacrifices to nurture the fields, etc. All of these would require actions that would be evil in the D&D sense of the term.
I want a "what do you do?" moment in this encounter and thoughts on the consequences just to test the alignment system in D&D and the notion of this one guy's paladin.
Well, typically, he would be Good for exterminating these Evil creatures. If they're evil, they did something to cement that choice, so the paladin would be just in destroying them. Of course, such an action might not be Lawful (because it could cause chaos and disruption to just go around murdering villagers), it certainly wouldn't be ideal (because persuading someone to be Good is always preferable for a Good character than just killing them for being evil), and it might violate the paladin's code (killing untrained commoners is pretty much dishonorable combat's poster child), but it would probably be Good.
That is, an action can be Good and still be non-Lawful, inadvisable, and in violation of a paladin's code. Any paladin who believes that all Evil should be killed (rather than stopped or ended or destroyed) is truly thinking Evil thoughts themselves, lacking the respect for life that is a hallmark of Good. Such a paladin is ripe for a fall.
It's one of those times during which a Paladin's call to exterminate evil should probably occur in their hearts and minds with the sword of Wisdom rather than in their chests and heads with the sword of Strength.
My own method of messing with
detect evil usually involves creatures like tieflings -- creatures who detect invariably as an alignment that they may or may not have. It doesn't matter what alignment they really are, they will be seen by magic as evil.
It's one of the many examples of why magical alignment detection is not reliably translated into actions.