As a counterpoint to the "Mercy" will bite you crowd.
I DM. I am DMing a group through the Return to the Temple of Elemental Evil. They have been playing for about 6 months. They have showed mercy, even the LN Dwarf of doom.
SPOLIERS FOR THE RttToEE.
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They let some Orcs live in the module when they realized they had been chopping through the orcs domain and then mostly the orcs were backed into a corner, with the women and children. They just screamed in Orc, "You not fight us, We no kill you." The Orcs hate the PC's, but they know not to attack them now. They think of the PC's as a more powerful tribe to tolerate. They leave eachother alone.
The party let one of the human gaurds go when his buddies were all dead and he surrendered. They didn't know he was Neutral and just doing a job. They just offered him this: "You go outside, gather up the horses out there, take them back to town, and take this money. This is for you, this is for the stablemaster. You don't come back here. You screw us, you've seen what we can do.... we'll find you and take you out." As the DM I ruled that the guy was scared straight and took the horses back to town, and is now trying to make a real life for himself.
They have saved a Dwarf prisoner and are gonna take him home since it's only a few miles.
They were NOT going to take the money and items in the Temple of Mordain they discovered in the place. They thought about it and the player, a LN Cleric of Mordain Dwarf, prayed about it. A minor angel of the god came into the players dream and said "If you use the temples wealth to fight this evil, and restore this temple, who better to have this wealth?" The players were happy they weren't screwing up with the "Good" gods since the Evil ones had it in for them.
This party is Neutral Mercenaries and they seem to act better than some of the Good parties and peoples you have talked about above. I feel better about my players after writing this. Thanks.
The players DID kill a surrendered guy before. It was a CE Priest of the mad god, and after a "Detect Evil" and the guys actions, and his possessions including human skulls and such, they killed him. They are Neutral, but they still cared enough to bother with this instead of cold blooded murder when not in battle.
Good should be held to a higher standard in 3E. If you as the DM set this up and enforce it, you will change your game. If players don't want to be good do not force them, they can be Neutral. Even then, as I show above, that does not equal mindless killing machines and looters. Something to think about.
P.S. I'm really, actually pleased some people above (Thank you) really liked my post. I really have felt this way for a long time and I had to finally say something. I'm glad others can see that Good and Neutral and Evil are REALLY different.