I love the way that DDO conforms to so many of the Pen and Paper (PnP) D&D concepts of 3rd edition D&D. To that effect, I feel any changes, upgrades, enhancements and updates should keep in mind the game it comes from. I know there are a lot of house rules, but Alignment has always been a mutable factor in the game, that can change based on your character's actions, which is how paladins can fall. I would love to see an ACTIVE alignment system in DDO. Some suggestions include:
1) Adjustable alignment based on Character actions
2) Alignment-based spells
3) Alignment based weapons
1) Adjustable alignment based on Character actions
Ransack bonus: This is a chaotic behavior if I have ever seen one. Quest giver: "Help save my house from the evil assassins. Bonus: +15% for destroying everything in my house!" Advancing Ransack should earn you Chaos points. Keep the ransack bonus XP, though...I will introduce a way to balance it out.
Pacifist bonus: This rarely seen bonus should earn you some Good points.
Collectibles: Have you ever seen a player who was obsessed with gathering each collectible in a dungeon. This is a lawful behavior, and should earn Lawful points. These points should always balance to 0 with the amount of Chaos points you can earn in a dungeon. (Maybe 100 points per dungeon, if there are 100 breakables, and 10 collectibles, you would earn 1 chaos for each item YOU destroyed, and 10 lawful for each item YOU collected, not including treasure bags or chests).
Certain decisions in the game should earn evil points. It's ok to make a minimum (to where people are stuck at neutral), if you wish to maintain the current system. Giving the dead girl the gem in the Delarra's pack strikes me as an evil action.
Perhaps each alignment has 10,000 points before dropping in to Neutral, which has 20,000 points. You start your character at one end of the spectrum, so a Lawful Good paladin would start with 10000 good and 10000 lawful points. If all he did was break crates, when he reached 0 lawful points, he would be at 20000 neutral. True neutral would be at 10000. When he hit 0 neutral, he would become chaotic. (Just a sample system, feel free to improve it)
2) Alignment-based spells
To a certain extent, these are already in the game. Way to go Turbine. Alignment does matter (Protection from Evil, Smite Evil, Chaos Hammer). However, some of the most basic D&D spells are not:
Detect Evil/Good/Law/Chaos/Alignment: This suite of spells would be useful in the game even if no other changes are made. The above spells would allow players to properly use some abilities, and learn more about their opponents (the divination school is way underrepresented in DDO...a game with lots of data that could be provided to players!) In my PnP games, I always envisioned these spells as showing an AURA around the detectee, which would work wonderfully in DDO. Evil is pure black, Good is Pure white, Neutral is grey. Chaos is pure red, Lawful is pure blue. Apply a color palette based on the number of points in that alignment (if that system is also used) and you could get a variety of colors for characters...a lawful good character would have a baby blue aura, a chaotic good character would be pink, a true neutral would be some sort of purple, a neutral good would be white, chaotic neutral would be red, chaotic evil would be crimson.
Undetectable alignment: Anytime you add a feature, make sure you have a way to hide it if you want. This spell/ability may be available to rogues, for example, or to NPCs to hide their true intent (The first NPC in Running with Devils, perhaps!)
Protection from Law/Chaos/Good: As Protection from Evil, but from different alignments.
Dispel Good/Evil/Law/Chaos: As per lvl 5 Cleric spell in PnP.
Magic Circle against Law/Chaos/Good: As Magic Circle Against Evil, but from different alignments.
Other PnP spells you could include: Dictum, Shield of Law, Word of Chaos, Cloak of Chaos, Blasphemy, Unholy Aura, Holy Word
3) Alignment-based weapons:
Congratulations! We already have a great system of alignment-restricted weapons and armor in the game. Cannith crafting could be updated to allow an alignment restriction to be placed on an item, thereby reducing the Minimum Level(ML) of the item by 2. These would be divine shards, and the components to create them would be sold by vendors representing the various alignments. Perhaps good would be sold by Silver Flame, Chaos by The Yugoloth, and Lawful by House Deneith (or some future faction).
In summary, Alignment is already a deep-seated aspect of the DDO game. It is often overlooked as simply a prerequisite for classes or certain weapons, but a more dynamic system could greatly enrich game play. Adding the ability to detect alignments also enables players to more intelligently use abilities.