I definitely agree that the way Good vs. Evil is handled now in most games is quite ham-fisted. In most RPGs, the good self-sacrificing options usually gets you the best material reward as well, which is quite lame. Having the opposite occur would be interesting; evil gets better material rewards, good gets better relationships and endings, perhaps. Or even a direct split would be nice. 50% of the time, being evil gives greater material rewards, and the other half of the time, being good does.
I also think that the single karma system doesn’t make sense. Karma and reputation should be distinct entities, for starters. If you do something dastardly in private, the whole world may not know about it. Having two separate scales would help a hell of a lot, just by itself. You should be able to cultivate a great public image while still being an evil son of a bitch. Some entities (dieties, magic artifacts, high priests) would find out and care about your karma, but most of the game world would react to your reputation.
Splitting reputation up would be interesting as well, though probably limited by how much they can program. It would be nice to have the hero-villain scale, as well as a violent-non-violent one, and maybe a law-abiding/outlaw one too. If you had a violent reputation, you could more easily intimidate characters into doing what you want. However, the pacifist order of monks may not train you in the ultimate healing arts. If you had an outlaw reputation, authority figures like sheriffs and mayors would be less inclined to trust you, though you may find yourself able to make more inroads in the black market. Perhaps undercover missions are only available to those with a sufficient outlaw reputation. Hell, maybe the sheriff hires you for such a mission; you may be lawful in truth and an outlaw only in the public eye.
So many ways to improve the system and I’m disappointed that modern games like Fallout 3 still cling to archaic single-scale morality.