ALIGNMENT SYSTEM IS LAME.
My DM threw a moral dilemma at our party in a game. We had just rescued a bunch of starving, nearly-dead prisoners from a dungeon, and we were going to rest for the night before deciding how to get them to town in the winter, when they only had rags to wear. My cleric made a heal check to see how they were doing, and realized they had ghoul fever that could turn them all into ghouls at any time. My character gathered the party around out of earshot of the prisoners, and started the conversation with, "I think we might have to kill them." My cleric is CN, and took a stance on the dilemma that fit her alignment: it's better to kill the prisoners now while they still have their humanity, and so they don't kill/infect the party members. An evil reaction might be to lock them back up in the dungeon, or to get them back to town quickly where they can infect others, or something along those lines. Obviously, our good-aligned party members wanted to try and treat them (with our very low heal checks), and only kill them if they turned into ghouls and attacked.
Neutral characters aren't without alignment, and throwing moral dilemmas at characters is a good way to get people to consider their alignment carefully. People of different alignments will (or at least, should) have differing opinions when presented with a moral choice. There is a valid neutral response to things, just as their is a valid good, evil, lawful or chaotic response.
Mechanically there are some benefits/drawbacks to neutrality. Clerics and Inquisitors must be within one step of their deity's alignment; for true neutral deities like Gozreh or Pharasma, the player must be neutral on the law/chaos scale or the good/evil scale, at the very least. Druids also have to be of neutral alignment. Deviate form that, and lose your power. Neutral can also be difficult to play properly, so classes that rely on a neutral alignment can be tricky.