I'd have to say that killing probably SHOULD play rather a large part in defining alignment/reputation. A bit of indiscriminate massacring should have a heck of a lot more influence on how people think of you than whether you managed to retrieve Generic Quest Item A.
If you wipe out the local bandits, their victims will love you a lot more; if you wipe out a local village pretty much everyone will hate you, including the bandits (You're a rival AND wiped out their normal victims. Who will grow their food for them now?).
It should not be the only determinator by any means, but I think it's an important one.
Oh well, time for a bit more elaboration.
When I meant killing, I meant as in when you enter one region and there are say, 10-50 bandits the act of killing them is rather small (+10 Renown, +2 Good alignment per bandit) BUT having got the quest to wipe out a certain bandit camp (unlike DD you can get more quests
for a bigger variety of things, quite a few of which are combat oriented, like this one for instance) once it's done your quest log pops up, says "quest solved" (if you fail a quest it says "quest failed") and displays a tab saying what you got
(say +5000 renown, +500 Good alignment points, +10000 gold, +7500
experience points, if you fail you still get some experience points, I think) from completing the quest. (And vice versa for the "massacre trader's camp" quest) But best of all, it's actually pretty fair for whether you want to be good or evil (unlike a FEW games I've played ;)) Regardless of the degree to which Renown and Alignment are affected by combat, I personally think this would be a much better substitute for the reputation system in the original DD (not to mention the "fairness" of your personal choice of alignment).
Edit: P.S it was so much fun having me playing "the good guy" getting my halo and all and having my older brother play "the bad guy" getting his horns and all, and then (in an extremely funny way, of course) comparing our two characters when they were the same advanced and "promoting" the strong points of our own characters while "undermining" the weak points of the other guy's
character.
