I'd love a reactive world where events progress even when you're off doing unrelated exploration or sidequests. It's great that you went into those catacombs and found a neat sword, but the bad guy killed the lord you were supposed to warn about a pending assassination plot.
Say you're chasing some character relevant to the main plot. As you're pursuing him, there's a burning building nearby, and you hear some kids inside or whatever. You could chase down the other character, get the info you needed and continue on your quest. Or, you can go help those kids, but then the other character escapes, and you end up in a dead end and have to find out other ways to investigate whatever the main plot is. Being a 'good guy' ends up being more hurtful to the player - you don't get any awesome loot, or anything. Instead you just made your quest a lot harder. That's what deciding to be 'good' should be, not being artificially rewarded by the game.