I remember you saying that to me on numerous occasions.
Was I wrong? 
Remove alignment
It wouldn't be that much work.
Lets give it a try...
It's actually easier than one might think. In the MUD (codewise), alignment is numerically based. Goodies are +750, neutrals are 0, and evils are -750 (mobs can have those numeric values set up to 1,000 in either direction).
I experimented a while back with dynamic alignment and it actually worked pretty simply, though not expressly in the way Mali is proposing. Every class started at a basic level (-350 for evil, 0 for neutral, +350 for good), and based on what a player did (at the early stage it was based solely on killing things) they would would get + or - alignment points. They were stacked, meaning, for example, the more "good" you were, the less positive points you'd get for killing evils over time. We even added affects to some items that reduced or increased your alignment point value, and set levels in your "score" based on "how evil" or "how good" you were, e.g.:
"You are mean." (-350)
"You are a complete bastard." (-450)
"You are wicked." (-550)
"You are demonic." (-650)
"You are the Anti-Christ." (-750)
Because of the nature of being evil, it was designed to take a considerable amount of time to "dig your way out" from being evil, typically by killing evil mobs or other evil players of much higher level than you. Immortals were also given the ability to grant or remove "favor" from a player for certain actions, which could boost a player in either direction.
It required no change to objects or mobs. The majority of communer spells are architected in such a way that they account for the player being of a certain alignment (similar to the way an [OUTCAST] flag works) so the spells required virtually no reworking.
So, it's definitely do-able.
what would the varying degrees of evil/good have to do with playability? Like certain prayers/spells require you to be a certain degree of morality? Or its just one of those extra bits of info?
Removing aligns in a game which is based completely on the aligns system sounds fun yes.
what would the varying degrees of evil/good have to do with playability? Like certain prayers/spells require you to be a certain degree of morality? Or its just one of those extra bits of info?
It would allow for dynamic characters that can change over time, adding to RP potential and flavor of the game.
The way it is now, you are one alignment at creation and the same alignment at con-death. Some players manage to get outcast and change alignments, but that can seem like a penalty instead of reflecting character depth.
The naysayers think this would break the game. I disagree of course, and think it would greatly widen the potential for character development and roleplay.
You can still play as 'good' or 'evil', and as Crypticant suggested it may be best to give each race a starting point. I envision the races, factions, and experiences of the character to influence their choices and the context in which those choices were made rather than a static "chaotic evil, lawful good, neutral neutral... or else" box-like roleplay system and enforcement that we have now.
Currently, only titles, q races, and cabal powers effect character development at the later stages of the game. It would be more story-like and very interesting to see characters change over time beyond these traditional methods.