People look at me funny when I tell them that one of my favorite D&D characters started out as Chaotic Evil and, over the course of three years of play, slowly changed alignment a degree at a time until he landed on Lawful Good. Of course, his character sheet never actually said “Chaotic Evil”; the DM wouldn’t allow evil player characters, so I wrote Chaotic Neutral, but I knew who he really was: a selfish, self-centered hellraiser. His name was Oedmund Laufreysson, bastard child of the Norse god Loki and a whore. I based him on Edmund Blackadder in Blackadder II, only more competent and bloodthirsty. His story arc was that Loki was continually trying to get him to come completely over to the dark side, and initially he simply didn’t want to be anyone’s pawn. As he developed relationships with other player characters, saw the atrocities of evil beings, and formed alliances with mutual enemies of Loki, his world view changed. But the end of the campaign the ranger from the snowy wastes was a priest of Tyr. Looking at it out of context, it might seem silly or wrong, but over time, watching the character develop, it made perfect sense and felt completely correct. Alignment helped me, and my DM, shape that character’s journey. We knew where he started, and I knew where I wanted him to end.
Alignment is a strange and wonderful thing, and also an incredible pain in the ass. It can be difficult to work with, limiting and stifling, or it can be great shorthand. Too many times in my youth my fellow players would meet and NPC and, after casting Know Alignment, run him through rather than talk to him. As an inexperienced DM I sort of let players walk all over me with this. Even today, when I can make a plot point out of the NPC’s murder and call the city guard, it’s kind of hard to hold players accountable for alignment-driven behavior in a dungeon or out in the wilderness. It’s sort of implied that that’s what NPC alignment is there for.
For a long time, I threw alignment out completely because it ruined stories for me, or at least the storts of stories I like to tell. I like sympathetic villains, guys who are bad but have some redeeming qualities. I can play that, but the second the character is identified as “lawful evil” it becomes moot. The bad guy label trumps any and all skillful roleplaying. I also like flawed heroes, because they’re more interesting and provide more story hooks. An ally just screwed you over? Well, that’s cool, he’s Chaotic Good, and Chaotics do that sometimes, but he’s still good so he gets a pass. Buh? How about the Lawful Good NPC that screwed you over, because in his mind the end justified the means? Again, he either gets a pass or it must have been some Evil character framing him for it.
One way I’ve handled alignment since is to give NPCs a spectrum. Left, right, and center. A “Chaotic Evil” character would have that in the center, with “Chaotic Neutral” on one side and “Neutral Evil” on the other. If the characters try detecting his alignment, I answer based on how he’s acting. If he’s intentionally suppressing his wicked ways around them, he might read as Chaotic Neutral. If he’s flat-out being bloodthirsty and vindictive, he might read as Neutral Evil. Alignment becomes flexible and situational, and it also gives me some wiggle room to roleplay the character.
Another method I devised rather late in my last campaign, which I plan to revive for the Pathfinder game I want to run, is to have alignment opposed (behind the DM screen, of course) by Charisma or a Persuasion-type skill. It tinkers with how Know Alignment works, I know; rather than magically looking into the character’s soul and tagging their true self, it measures how they’re acting. Behave like a goodie two-shoes, and a skilled Lawful Evil character can even fool a spell into believing he’s Lawful Good. Modifiers, of course, apply to every degree of alignment changed (I used -2 per shift, so LE to LG would be -4). It would take a Sense Motive check to see that the character was lying, but that would get penalties based on what the spell said (so, if you Sense Motive on the LE character that read as LG, you’d be at a -4 penalty — how could the spell be wrong?).
The point is, alignment should alway support story and never impede it, and if I have to tweak or invent rules to aid that mechanically, I will. I don’t want to throw out alignment completely, because I do perceive that it has values, but I don’t want to have to tap-dance around it in order to make characters morally complex, conflicted, and deeper than a kiddie wading pool.