I finished ME1 the other day. Replaying that in 2021 really shows how much the game was an incubator of ideas. Playing ME2 highlights that to a crazy degree. The MAKO is gone. Inventory is not longer a headache. The hacking mini-game is somewhat improved. Dialogue is more nuanced. The game is no longer 5 main quests and then 80% MAKO/empty-planet/same-building side quests. In nearly every respect, ME2 improves upon ME1.
Included, Paragon/Renegade are better balanced, which itself has evolved from KOTOR.
ME1 Choices
The challenge in ME1 is mostly around Renegade – in that nearly all the choices are objectively bad. Aside from perhaps the double crossing side quests on Noveria, the Renegade choices all focus on killing the person with whom you’re having a conversation. Ok, ok… hanging up on the Council felt good. Paragon choices, by comparison, were about you saving starving puppies. It’s not that people want to only play Paragon, it’s that the choices provided are “keep the story going” and “stop the conversation”. Most people are going to take the former, so it’s not really a choice. By the end of my playthrough, even after trying to take as may Renegade choices as possible, I was a clear goody-two-shoes.
The devs clearly spent cycles building this system, and the rates were abysmal for Renegade run throughs. Clearly an improved system was required.
ME2 Choices
There are two notable changes here. Fist are the interruption actions that can be taken while an NPC is talking. The paragon ones are simple enough. The Renegade ones are usually about punching people, or interrupting their speech. They are well placed, and with few exceptions you should be using them.
The second is the scope of the actions. The choice itself is less about the end result but more about the path to which you achieve it. The stolen chit side quest is a good example, where you physically intervene at the end when injustice is the outcome. (Weird side note – for the vendors you get Paragon/Renegade options to get discounts… makes no real sense…) The majority of the points aren’t directly related to outcomes, simply conversation paths. Each squad member has quite a few options to help move them along, and a certain preference to dialog options. Zaeed clearly is pure Renegade, while Jacob is almost entirely Paragon. There are also more dialogue options present, and through some game mindset calibration, you get taught that it’s good to explore all options as the consequences are story related, rather than outright rewards (as in ME1).
By the half-way mark in ME2, my Paragon and Renegade are relatively balanced. The Renegade choices are less about being bad, but more about the ends justifying the means. Punching that reporter running garbage stories on me feels good.
D&D Viewset
The concept of morality and choice stems, as nearly all RPG things, from D&D.

Video games prior to 2000 were pretty much all in the Lawful Good area… you were the plucky hero. As more RPGs came about, more choice was presented. Ultima famously brought in Virtues to reflect this in a different light, as people were “optimizing” the game by being as evil as possible. You can see these influences in all Black Isle and Bioware games.
ME1’s Paragon seemed to best fit with the Lawful Good mindset. Follow the rules, be good. Renegade was closer to Neutral Evil… there was some logic to the choices made after all. But you were still evil.
ME2 tweaked this, bringing them all closer to neutral. Paragon is closer to Neutral Good, while Renegade is somewhat closer to Chaotic Neutral – not bad, just a different set of rules. Moving away from the purity of choice allows more nuance into conversation, even in the middle of a game. It then focuses on the outcome of the decision as the reputation (e.g. you saved X) and less about how polite you were in doing so.
Other Games
Other Bioware-like games have come since, and each has tried to tweak the model somewhat. Pillars of Eternity is the more traditional D&D model. Tyranny only worries about Evil alignment (and does an excellent job!) Divinity is the outlier here, as it’s arguably larger than Baldur’s Gate 2 and has a rather complex morality system that is more outcome based (and reputation) than pure alignment. As BG3 continues, it will be interesting to see if it’s more in line with the older model or the new one.
Clearly it’s more complex to keep track of the outcomes of every decision rather than a point scale of good/bad. It’s a better experience though, and one that you really notice when it’s missing in an RPG that presents choice.