Law vs. Chaos: Moral relativism

Picking up on my exploration of different ways to look at law vs. chaos on the alignment scale. I thought moral relativism was a very good one to start with. For a lawful character, they could tend to see morality as very absolute, possibly completely so, while a chaotic character could tend to see morality as far more relative.

For instance, a lawful good character is going to be far more likely to see certain things as always being wrong, no matter what the reason. This often leads to trouble if you have a thief in the party. On the other hand, a chaotic good character could be far more willing to do some morally questionable acts if it's in the interest of furthering a greater good, they might be more willing to take an attitude that the ends justify the means. 

Now one area to watch out for with moral relativism is how this will apply to good vs. evil in game mechanics. Personally, I tend to believe that if the game is going to have certain game mechanics hard tied to good or evil alignment then it necessitates that good vs. evil be fairly rigidly defined. This doesn't mean that you can't play morally relativistic characters, it just means you may have to be prepared for some of those actions to trigger an alignment shift on the good vs. evil axis. For instance, if that chaotic good character mentioned above were to start making frequent use of torture as a way to extract information I'd be very tempted to shift them to chaotic neutral, even if they were using that information to further a good goal. I realize that not everybody sees things in this way so GMs would be well advised to clarify their position at the start of a campaign so that this doesn't result in conflict later. 

Where I think this gets particularly interesting is it allows for a good amount of room for playing an interesting neutral character on the law vs. chaos axis. For them, certain things would always be right or wrong whereas others would depend on circumstances. Which things fall into those categories and why? Or perhaps there's certain circumstances that always make something right or wrong, again why? I find that typically playing a neutral character on the law vs. chaos axis just tends to mean that law vs. chaos really isn't that important, it just fades into the background, and I like the idea of this approach allowing some real meaningful "meat" for a neutral character, as well as for each extreme.