Having a flagging system like UO is no different than having a corrupt government. Think about it from the perspective of Batman, The Punisher, Spiderman, The Three Muskateers, or Zorro. Are any of them any less heroic than Superman or Captain America?

Well the thing all of the first group have in common is that they're all (technicality only, in Batman's case) wanted by the law. Hell, even Captain America was wanted by the law right before his death. Just like UO, using stupid rules to tell who's good and bad is, well... stupid.