Fork in the road

[Deadeye Dragoon]

Well, going by Morrowind, it didn't have a reputation system per se. It had a "reputation" but aside from a few dialogue responses it had no game impact. The closest thing to consequence were bounties placed on you if you killed or stole, you'd have to pay a criminal contact or other contact to get it taken off, or spend time in jail where your skills atrophied, or something else I don't remember. Anyway the point is Bethesda may not see things as hard-coded as we fear they might for Fallout.

Morrowind also had its share of "good", "bad", and neutral quests, though nearly every one was linear and each quest didn't have a good/bad/neutral branching option within it. If they do spend time studying FO1 and 2, or as mentioned Torment, I trust they could come up with some suitably complex and ethically/intellectually/roleplayingly-challening quests.

As for Faction, I'd prefer two kinds--public and private. Your private would be based on everything you do whether someone sees you or not, and would open the way for perks and some dialogue options. Your public faction would be everything the public has seen or heard you do, and would be in two parts itself--by area, and overall. The overall rep/karma/faction would be your initial rep when travelling to a new place, and would never get too high or two low (unless you're a real polar character). The second part would be the area rep, which would quickly change over time as you adventured in it.

The area rep would work to initiate new dialogue or quest or barter price, etc. options as you worked through it. This would be "exponential" in that if there are 10 quest-giving NPCs, each one would have variations on a quest based on the area faction you had by the time you reached them. It would quickly get far too complicated and numerous if it was truly exponential though, so perhaps 2 or 3 interlaced branches would be good enough.

One benefit to this would be replayability, you could not only play each whole area differently, but you could alter the "route" you take through the area re: quests or such, say first you go to NPC 1, then 2, then 3, but next time 3, then 2, then 1, with exciting different reactions based on the new order.