Evil, in reality, is objective.
Now more on topic, fast as I have to go, I'll answer your question:
I just play with some 'mental illness.' Renfield syndrome is a good one as 'psychopathic' is just too damn easy an excuse. Sucks that you have to give an excuse like that though, as opposed to having very valid in game reasons given.
Still I think the problem, a lack of in game rational reasoning, isn't the game itself but the society we are existing in. To society as a whole the most evil someone can be is a raging psychopath. With this as the 'measuring stick' it isn't that far fetched to see why game designed have irrational blood driven killing of an 'innocent humans' behind the majority of their evil actions. If it can't be a rational death then it is evil, and that is all that matters to the game designers these days. 'Teaching the children good and evil' or some other crap.
While, if you raid a goblin town and slaughter every man, woman and children within it is a good or at best a neutral act. The differing point being you can 'rationally justify' slaughtering the goblins because... ironically... they are evil.
I would love to see some real choices in role playing games, particularly those that boast you can be 'evil' then the whole 'slaughter and steal from innocence' being the evil outcomes. It can't be that hard, thinking quick I come up with an example.
You have a grip on power, as maybe a magistrate, but the lord you serve is quick to resort to hanging people who are a threat to his rule and might tax his people a touch to much but not grossly so. Do you help keep the law or throw the realm into chaos by plotting against him?
And which would be the 'evil' outcome?
Or, for another good example, Ned Kelly! The rich class are a bunch of dicks using the law to keep poor farmers down and get rid of competition. Do you turn to crime to 'help' the under privileged classes even knowing people will die?
Actions that might lead to real evil outcomes but have rational, and even moral, justification behind them can't be that hard to think up! Games need to fix this by accepting the existence of the whole 'grey and controvertible' area. By creating situations where you are left with what would be two acceptable outcomes, having to guess which is the 'path to hell littered with good intentions.'
Closest I heard to a game doing this was planned in fallout 1. Originally helping the local pit lord get rid of the sheriff would lead to the town prospering. It was considered to controversial and the outcomes where switched before release. A loss I think, cause it would teach people that wandering into a strange town and helping what you might think is the right people may very well lead to disastrous outcomes.
