This is an extended response to Episode 28 of Here Be Gamers. I didn't really want to flood their comment page with an essay, so here's the 12" remix of my comment there.
Good and Evil as part of the cosmic fabric.
Although in the actual world (the one we're in now), good and evil are seen as moral values that we superimpose over actions, there's no reason to insist on the same model for a fictional world. One of the questions that is typically asked when a GM is creating a world for the campaign is "How does magic work?" We don't have any problem with a magic system based on emotions, so how about a magic system based on morals? Take the Star Wars universe. The Force isn't neutral, it has a light side and a dark side. George Lucas has created a universe in which Good and Evil aren't perspectives, they're interwoven with a fundamental force of the universe. Although gravity and electromagnetism are neutral but fundamental forces, the Force isn't. Good and Evil interact with it. By taking them out of the Star Wars setting, you lose that aspect of the story. In that kind of fictional world, we shouldn't reject the dichotomy of Good and Evil just because it works differently to the actual world, we should embrace it. It's part of the ontology (as the philosophers say) so it should be part of the story. The same is can be said for D&D. If there are alignments, and there are items (weapons, artifacts, etc.) with alignments then Good and Evil are part of the ontology of that world. So embrace them by making them part of the story.
The Monstrous is Evil because Evil looks Monstrous
Yes, that's a tautology. However, that's one way that the monstrous features in fiction. We embody our fears and apprehensions into the monstrous because it is so radically different to what we know. One way to read a book like Frankenstein is to see it as an embodied fear of science and technology. At the time it was written, medical science was deconstructing what we thought we knew about the human body. Suppose it proved that the human was just a biological machine? No soul? No death? Of course this is monstrous! It's terrifying and can be treated that way. By making the fearsome thing (the evil thing) monstrous, it clearly distinguishes it from the kind of being that makes up the audience. The audience is human, and shares a fear of the monstrous Thing. When it appears more inhuman, it is distanced from humanity while at the same time becoming more tangible as a thing to be located. Once located (in the body of the monstrous) the audience and other characters can relate to it.
These kinds of fictional worlds aren't morality tales about the misunderstood beast (unlike Beauty and the Beast), they're about a clash between what we know and the neverending onslaught of the unfamiliar and the alien. Protagonists look like the best that humanity can offer (brave, strong, beautiful, etc.) whereas the antagonists are misshapen beasts which are so far removed from even the worst that humanity can offer.
Conservatives and Revolutionaries
So let's leave ontology and fictional functions alone for this last one. Suppose the fictional world is like the actual one, and suppose also that Good and Evil don't affect appearance. The dichotomy of Hero and Villain seems amiable enough. Still, with the examples from the podcast we might be better to say Conservative and Revolutionary. The conservative hero wants society to develop organically, slowly, all together; whereas the revolutionary wants sudden change now! One will use the political process whereas the other will use force (or threats of force). The difference in these kinds of stories is really about what the character will accept as the means of change and the pace of change. It seems out of place for a D&D game, but totally appropriate for Burning Wheel or a superheroes game.
To take Good and Evil out of an RPG simply because it doesn't align with what we understand about the actual world is a mistake. If these strong ideas are out of place with the fiction, then remove them by all means. However, if these ideas are part of the universe itself then leave them in. The decision should be based on the fictional world of your story, not the actual world of the gaming group.