EDIT: Due to the volume of comments saying the same thing, I will post about the general consensus of those that replied: 
Morality systems today use too many bars or systems that gauge how good or evil you are. It takes away from morality because then gamers just fill it up like an XP bar. It would be far better to have an organic system where moral choices happen automatically and aren't monitored apart from story changes (killing a party member, for example, would affect the outcome of the story). Otherwise, moral choices shouldn't even be mentioned in the game because players will do what they're naturally inclined to do in abscence of a system. this would be easy to do but no company has done it yet. 
Also, players feel inclined to either be very good or very evil because you are penalized for not doing so (can't upgrade powers in inFamous, lose loyalty of party members in ME2, etc.). Neutrality is generally penalized in games, which leads gamers who would otherwise be neutral to pick a side. this goes back to the previous paragraph- don't track or reward morality (beyond the choices themselves; I have used the example of killing an ally for a unique gun many times.) 
 
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Original blog as follows:
 
 
This started out as a response to someone else's blog post about the same topic; I originally intended it to be a short response but it ended up being semi-long and I want to continue discussion about the topics raised in my post specifically, so I reposted it here.  The response is to why gamers, when faced with a morality system in game, will always be either completely good or evil, and never neutral. I've actually thought about morality systems for awhile, and i've yet to come across a game that does it well. the point of a morality system is to gauge the actions of your character, but when implemented it usually ends up as another game mechanic that gamers want to complete. I think that this is due to several reasons. First, the way its presented- as a gauge or title is very much the way stuff like Health and XP is presented. This leads morality to be viewed as another XP gauge- something to max all the way out. Second is the presentational limitations of games- there are very few games that connect to gamers emotionally, and of those very few that are powerful enough to influence their decisions. A prime example of this is games with multiple endings. The intention of those is to reward gamers with viewing a special ending that's reflective of their actions, but more often that not gamers adapt their gameplay to get the ending of their choosing. Instead of the morality being an impact of gameplay, gameplay becomes impacted by morality.  
 
Which leads me to the question- do you think that morality systems in games are flawed? if so, what would you do better/differently?
 
The original post is as follows:
  
I think it's more because a good morality system hasn't been implemented yet. Either you're completely good or you're completely bad. You addressed the lack of mixed decisions, and I think there's a couple reasons for this. First is that you never care enough about anyone to make an opinion based on them- you won't hate anyone enough to just kill them, or like anyone enough to spare them. For games that reward being good/bad (bioshock, inFamous), there's no incentive to be neutral. In Bioshock there are achievements for either rescuing or saving little sisters- why save a few if you don't get rewarded for it. Other games like inFamous REQUIRE you to pick a side- if you don't you can't unlock abilities. It's like that for a lot of other games too-you're rewarded for being good/bad so there's no point in being neutral. 
 
Also, a big problem is the emotional disconnect that a lot of people have. A lot of people play assholes because blowing shit up and shooting helpless people in the face with a shotgun in GTA is fun. If we cared about the characters we were killing, it would impact our decisions but since games haven't reached the point yet where we're truly emotionally connected to the characters/story players will behave in the way they want to- either they want to be the hero, in which case they'll save the character because it's what heroes do, or they want to be a villain, in which case they'll kill the poor bastard because that's what villains do. 
 
I think a part of that is also because of the media we watch growing up- rarely as a child do you watch cartoons where the characters are morally neutral in their actions. Either there's the archetypical hero who does the good stuff no matter what (And always wins-perhaps why we always play good people), or the villain, who will always commit evil acts (and loses). When we are able to play these roles ourselves, we naturally want to act the way our idols in cartoons do- to be like Superman and be the ideal hero, or to be like Team rocket (pokemonlulz) and always be the villain, because when we were growing up that's what all of the characters we saw did and we naturally want to imitate them.