Computer RPGs have never been good at demonstrating a "believable" morality/ethical system, in large part because they tend to be morally simplistic (absolute good vs. absolute evil), even the non-fantasy games. In a more complex model of a believable setting (believable as opposed to realistic), a character would be affected by a variety of issues when making ethical decisions.
1. Personal ethics: What does the character believe to be right and wrong, and how committed is he to this ethical code?
2. Social ethics: What does society believe to be right and wrong, how committed is it to enforcing this code and what mechanisms are in place with which to enforce it?
3. Evidence of guilt: What do any of the other characters in the game know about the player characters actions? Did someone witness him killing all the bandits on the road and stealing their stuff? Did someone see him walk into that peasant's hut and ransack his meager belongings?
Shame, guilt, reputation, conviction (in both senses of the word) all would play a part in a complex, believable model. That being said, we're talking about a game -- if something does not have significant consequences to the play of the game, then it's really pretty pointless.
So, if our game has a guilt rating -- basically a measure of the character's personal sense ethics and how committed he is to it -- then there has to be some in-game consequence for the character violating his own ethical code. Perhaps self loathing makes him an asshole, so that he rubs everyone the wrong way; all the "friendly" dialog options are removed, or at least reduced. Perhaps he becomes more inclined to substance abuse, which affects his physical scores and skill levels. Whatever.
Likewise, a character may have a reputation, but only among those game characters who know his reputation. So, in one province, our character may be wanted on suspicion of murder, but having moved off to another province, where he's unknown, he does not have a bad reputation -- until a game character from that original province shows up and knows about the character's reputation.
See, it can get really complicated really quickly, and while I think this would be a great, fascinating game, I don't know if anyone else would care for it, or if it would even be technically possible to pull off.
Fun to think about, though.
L.