I don't mind if karma is "psychic", especially since it's an abstract concept by nature compared to faction reputation. I just hate how arbitrary it can be; my friend went through New Vegas as an insane cannibal working for the NCR, and somehow managed to get "Very Good" karma. The most effective way he found to bring his karma down to neutral wasn't slaughtering a town or completing evil quests, but just activating an owned terminal over and over again.
I want karma to be in 4, since it's a great factor for radiant questing and settlement building, but it needs work. Good & evil karma should be measured separately, like mixed reputations in New Vegas, and it should only change from quest outcomes and murdering innocents.