I think part of the problem was that NPCs didn't really "emote". If you attacked them, they either attacked you or fled. There wasn't any fear of death or mourning for the fallen. The actors in the game didn't care anymore than the player did if someone died. Now if you killed someone, and then had to watch their friends and family mourn them, then the whole morality aspect would quickly come back. But honestly players won't care about the NPCs if even the NPCs don't care if their relative die.
But, judging from some of the information we've been fed, this might be alleviated a little bit.
By the way, Blood for the Blood god.
Skulls for the skull throne!