Yes, but it shouldn't be too black and white. I don't think you should start the game saying 'I'm good', like the choice you have to make between good, neutral and evil in D&D games for instance.
It would be great if there would be something like a balance, a scale that indicates which way you are going. That would then also affect the interaction with NPC's.
If you are evil the authorities won't like you much, but underground factions will welcome you. The general populous would start to fear you, which could result in a negative attitude. On the other hand, if merchants really fear you, their prices will be good because they are afraid that otherwise you might just kill them: you have that reputation.
Just thinking aloud here. it's just that I haven't seen many games in which the good/evil thing has been properly worked out.
I realize that this an old thread, but I think that the Fallout series is an excellent game that allows you to either be good or evil, or even a little mixture of both. <img src="/ubbthreads/images/graemlins/badsmile2.gif" alt="" />
