I think kotor 2 was onto something with the "light" "dark" and "neutral".
i think something similar to that idea, but perhaps in 3 different morality bars:
a type of "jedi code" one that determines how much you adhere to the jedi code. Doing things that are giving in to your passions or going against the jedi code would make you lose points in this, and it shouldnt necessarily be things that are "evil". And it would go up if you exhibit control. For example, if this system was in the first kotor, during the romance with bastila, by not pursuing it and accepting that it isnt allowed you would gain points, pursuing it would lose you points. Or a situation where you have to make a choice between something that furthers your mission and something you care about, such as the torture scene in kotor 1, or like in episode 2 when padme falls out of the dropship.
And then a standard morality bar, being compassionate, kind, generous, etc shifts it up, being selfish doing things that consciously lead people to harm, being evil shifts it down.
And perhaps even a third, "corruption" bar. Commiting truly evil deeds such as murder or things that consciously lead to someone's death or ruin could influence this, and using the dark side of the force would influence this too.
I think with this system, you could make it far more complex and give a much greater sense of depth, even if it would need some tweaking. By doing it like this, your morality and choices could have a much bigger impact on the game.
the "jedi code" bar would reflect how much control you have, and could influence how characters react to you, for example certain jedi masters impressed by your level of control could reward you with teachings or an item or something. It could also affect how easily you are corrupted (ie, the lower your jedi code points, the more corruption points you gain from various actions).
The "corruption" bar would give far more depth to the dark side. As it is atm, the dark side system really is pretty crappy. neither of the games really reflects the idea of temptation and corruption. In the movies and alot of expanded universe, simply using the darkside corrupts you, and as yoda says, "once you are down the dark path, forever will it dominate your destiny" while it neednt be THAT absolute, having a "corruption" bar could definately implement this idea into the game. drawing on dark side of the force would increase your corruption bar. Now this would need some working out, because if you were corrupted every time u used one of the darkside forcepowers the way the game is now, everyone would be sidious pretty quickly. It could be gaining a darkside power in a level up, or taking the force into yourself to become more powerful. Corruption could affect your dialogue choices, and also your appearance, which would make getting deformed a much better system. Through this system, you would become more deformed the more powerful in the darkside you become, not just if you like being nasty.
This system would also make it much harder to become light again once you are evil, which is supposed to be very hard.
This could open up a limitless amount of modifiers, interesting situations, tension between characters, pros and cons to all positions. For example, someone who is neither corrupted nor follows the jedi code has far more freedom than most jedi, but is far more suseptible to the trappings of the dark side, and drawing on it will corrupt him fairly easily. on the other hand, a jedi who follows the jedi code strictly would have a better affinity to the force, and all sorts of other rewards could come into play, but he would have to be fairly emotionally cold to maintain this. On the opposite end of the scale, a corrupted jedi would be very powerful, but his mind would be twisted and evil, and dialogue options would reflect this. He would also be deformed, which could have more affect than simply looking different, NPC's could react differently, some people would be too afraid to talk to you and wounds could take longer to heal, etc.