Personally I don't like karma a lot. Since it pushes you to be "good". If I want to be a low level kill at first sight jerk, I want to have this chose and don't have to be punished for it. But remember since "low level kill at first sight jerk," It's hard to get into a city without being arrested (sewers) and your "normal" shops might be closed , but new shops (black market ans smugglers market ...) are open for you. And you are most welcome at the assassins/thief guild that has some very rare stuff or the locations where you can "get" it.

See how the decision you make creates a whole new perspective in the game that a "divine paladin" would never see. This is basically a reputation system 2.0

Also a suggestion. Please put moral dilemma's in the main quest and not only the side quests. And since they are in the main quest, make sure the consequences are huge (like a burned village or a castle/ villages where the population has been decimated by an attack or decease (cemetery is full)).

Not in the mood for cheese?
That excuse has more holes than a slice this fine Gorgombert!