Certainly the most obvious answer is that it breaks game progression, which is a fair enough reason. Another perhaps even more pertinent reason was, as one of my friends explained to me, that when one has sufficient means to stop an evil there ceases to be a middle ground option. It took awhile for me to think through that statement, but there is evidence of this logic in the American legal system. For example, if you are a licensed medical professional you are duty-bound to do things such as perform CPR if the situation arises. To not do so is a crime, despite any potential fears of being sued should something go awry.
So what video games tackle the notion of middle ground? Well, Fallout 3 certainly offers that option, complete with achievements for reaching various milestones with neutral karma. After playing that game through as the hero, though, I'm not sure I see how there was much room for middle ground in that game, at least not what I personally consider middle ground. I freely admit that in a system where all actions have a mathematical positive or negative karma value associated with them that players can make their karmic sum equal approximately zero. I do not believe, however, that giving the downtrodden fresh water one second, then shooting a shopkeeper and looting their store the next is a "neutral" disposition in anyone's mind, no matter how the numbers work out.
One major reason why I don't really see much of a neutral path in Fallout 3 was that despite this being post-apocalytia, every person for themselves, my character was never that close to folding. I had a rough patch in the very beginning, but once I got my house in Megaton and didn't have to pay for healing I was on easy street. I believe I finished the game with over 10k bottlecaps and near fully repaired version of every weapon and armor. I never once came remotely close to being done in by radiation. My point is by no means to toot my own horn, but just to present the argument that under these relatively lax conditions how "good" can it then be considered to handout fresh water to random people? I needed it out of my inventory anyway and it was that or dropping it. Had I truly been at death's door, living from Rad-X to Rad-X, where that pure water really meant something to me, then it's a good deed to give it to someone else, and consequently then it's karmically neutral to keep it for myself.
So is there really room for neutrality in video games? I believe that there is, but it's likely going to require some strides in the art of game design before we truly see it come to fruition. Currently the path I see would be to ratchet up the difficulty for pursuing the path of good, but who knows. Hopefully someone much smarter than I will come along with the magic bullet.
