I'm going to have to go ahead and disagree with a lot of the posters in the thread. Deliberately killing a paladin in good standing is always going to be an evil act in a game I'm running. There are a lot of alternatives to killing the paladin that would stop him from screwing up your plan.
Yeah, I have to agree that murdering the paladin is taking things too far and I'd make sure there were repercussions. One evil act isn't exactly going to change your alignment, but I'd start scrutinizing behavior a bit more if that's your answer to a meddlesome do-gooder.
That said, this is an issue you probably need to resolve away from the table and set what levels of cooperation and conflict are expected from all of the players.