Regarding your point 1, I recently read an argument that the alignment structure in D&D was an outgrowth of its origin as a war game (specifically, the fantasy conversion of Chainmail). The alignments were indicators of which team could select those troops. Since war games are not particularly concerned with the individual morality of the soldiers, it made sense to group them this way. This was continued with the publication of D&D. That was a mistake (In MY opinion) but it is what it is.
Regarding goblin children: the crime against escapism is to include them at all. If Larian wants the goblins to be evil mooks that you kill because its a video game and they have red circles under them then they should leave the kids out of it. You include goblin children if, and only if, you actually want to make some deep statement about the nature of good, evil, and sapient creatures. I only played through that section of the game once, but I did not find it to be particularly deep.
Personally, I don't want to kill children of any sorts. If the option to kill the Tiefling children were present I would not do it. I'd still prefer that the option be there, because it would reduce the temptation of quest authors to make them super obnoxious underneath their invulnerability flag.
