Part of what I'm getting at here is that most players in these games make exactly one moral choice: "Am I going to play a good guy or a bad guy?" They never rethink that choice, and the game doesn't encourage them to -- in fact, it actively *discourages* them from doing so.

To me, a character arc implies a choice *during* the story (preferably at a climactic moment), not just a change in magnitude along an axis that you chose at the beginning.