First, in slight defense of the DM and his crit decision, how long was this guy DMing? It might be an honest mistake.
Take, for example, the Judge Dredd d20. One of the bits of equipment that judges are issued is the daystick (a simple nightstick). It normally does subdual damage, but does real damage on crits.
I don't know if any other games use this system, but it's possible that the DM may own one and used that as his basis. It may have just been a case of inexperience with the mainstream D&D rules.
Now, as to the party. Yep. Evil.
I mean, it's not like they were trying to rescue her, stupidly fired at the hobgoblin holding her, and accidentally killed her.
It may have been really stupid, but, c'mon, they were trying to break their criminal friend out of jail so they resorted to kidnapping an innocent. I mean, this is exactly the sort of thing PCs are called in to stop.
Those that are defending this party's actions are falling prey to the "Designated Hero Rule", which states, in part, "...that those that a movie chooses as its heroes shall never be held responsible for any deaths caused by their actions."
I read about the rule on a movie review site, Jabootu.com, specifically his short take (normally, his reviews are very, very, very long) on The Lost World. You can check out the full review here:
http://www.jabootu.com/lostworldnugget.htm
Here are a few bits I clipped out which illustrate the rule in effect:
"Sarah agrees to take the baby T-Rex with them, her biggest worry being that Malcolm won't like it. (This kind of falls into that "Sarah is a moron" thing.) Teddy, a member of their team who had nothing to do with bringing it into camp, is later horribly killed because of this. Again, no one casts any blame at Sarah or Earth First Guy, nor do they themselves ever indicate any guilt over getting this guy killed.
T-Rexes are not only smart, but they're polite. Therefore, they'll wait until the Designated Victim (here, the technology guy) saves the morally superior Malcolm (the 'Man should be humble in the face of Nature' guy), Earth First Guy, and Strong Woman Scientist. The last two, of course, are responsible for this predicament, including ultimately getting Technology Guy horribly slain, but the film will in no way acknowledge this.
Malcolm then righteously makes fun of Peter, The Evil Capitalist, for thinking that bringing mercenaries would keep him safe and enable him to complete his capture of the dinosaurs. Uh, actually, Peter's plan was working fine, thank you, until it was sabotaged by intentional human intervention. So much for the 'moral' here.
Inherent in Douglas' Designated Hero/Villain rule is that positions won't be judged on their objective merit, but rather on who is advancing them. Peter's position that they have a right to 'exploit' the dinos (i.e., put them on display) because his company created them is hardly insane. However, the film dismisses the argument because it's being advanced by the Evil Capitalist. More to the point, it has the argument advanced by the Evil Capitalist so that it can be dismissed. Yet, because Earth First Guy is a hero, his causing the deaths of literally dozens of people is ignored. In other words, the film openly judges the caging of (artificially created) animals to be more of a crime than killing other humans."
So, the arguement that I'm trying to make here is that people seem to be defending the actions of the party solely due to the fact that they are the appointed "heroes", regarless of how "unheroic" their actions are.
I don't think an alignment shift is in order. I think they were pretty much evil to begin with. Your alignment doesn't detrmine your actions, your actions determine your alignment.
With that said, I'm not a big fan of the alignment system. My big sticking point is the labeling of races. Let's be honest, using this system, humans should be listed in the Monster Manual as Chaotic Evil.
Personally, I like the idea of honor in Rokugan. A good leader's most trusted samurai may be LE. As long as he's honorable, his alignment doesn't matter.
Of course, the whole theft, kidnapping, and murder thing would fall into the "dishonorable" category anyway.
Now, getting back to the original topic, what should the players do?
One option is to roll up new characters and have them hunt down their old PCs.
Another is to let the party play things out with their current characters.
Of course, with this group, I wouldn't be surprised if they decide to destroy the evidence by burning the body, accidendally starting a huge fire which burns down half the town, including the orphanage, killing a hundred more people.