And that is why the game is easier with evil units.  There is no where I stated you are comparing equal level units, since that is not what happens in OB.  The stronger a unit is almost always = more evil, even if you are using higher leveled lawful characters they will eventually become evil if you keep using them. 

So in the end, evil = easier.

In fairness, though, a good game will net you Generals and Dragoons, won't it?

Getting generals and dragoons shouldn't be dependant on using an overpowered evil team to mop up maps.  Since you should still be able to get a high reputation while using some evil units.

When you get a lich or 2 on your team, you will understand how much easier the game can be with an evil team.

@Khuutra, I also forgot about increasing alignment. If you want to increase the ALI of a unit, you should deploy them and sit them in a temple for the entire level. I think the alignment gain is slow, but you can deploy a unit and just leave them in a temple.

Putting units in temples raises ALI?

I never knew that....

Hmm.... i tested the temple thing... left the leader unit on the first warren stage in the temple... didn't end up having any ALI change after 5 days.

It may not actually work, but as with most things with OB, most things end up being speculation or assumptions based on experience.  I don't think I ever paid close enough attention, but some time long ago, I talked with a few people that were convinced that temples helped alignment.  I have even seen it in a few strategy guides, but as with them, lot of speculation is put in there.

That's true.  It's so funny how so much stuff is just speculation and often doesn't effect stuff.

Yeah, so I went parusing some other online strategy guides and I can't find it anywhere.  It looks like the most likely formula for deciding alignment change is something like:

deltaALI directly proportional (EnemyLVL - UnitLVL + someconstant(possibly 1 or 2)) + (UnitALI - EnemyALI)

This means that really evil/lawful characters are stuck at the extremes.  Now I do know that OB64 has the unit equalization effect added to the game, but I have no idea if that is part of OB:MofTBQ.

EDIT: The speculation and guessing is even worse for OB64, IMO.

As Khuutra said, alignment matters primarily because it determines what classes your unit can become. A low-alignment knight can never become a Paladin, for example, and a unit with high-alignment can never turn into an Evil One. The good news is that once you've reached whatever class you're ultimately aiming for, you don't have to care about alignment anymore: a Paladin with 0 Ali. remains a Paladin until you consciously change his class.

But there are two other important reasons to care about alignment. First, your Lord's alignment helps to determine what ending you get. I believe it's also decisive in whether you receive certain items from certain towns.

Second, and more immediately, alignment affects how good your unit performs. Low alignment units hit harder and take less damage at night, and vice-versa. The same 100 alignment group that was crushing the undead at noon will have a tough fight on its hands at midnight.

As to how alignment works...*deep breath*

If a unit fight/kills a unit with high alignment, it will lose alignment, and vice-versa.

Fighting/killing units at a higher level than you raises alignment, and vice-versa.

When these two rules conflict, the enemy's level seems to matter more than its alignment (but the enemy's alignment is not irrelvant).

Radicalized units (i.e. units with very high or very low alignment) are less likely to change alignment than more moderate units.

Killing undead often raises alignment (but not always! The above rules still apply). Under no circumstances will killing undead ever LOWER your alignment.

You'll often hear that the tactics you use in battle affect alignment. They do not.

Your Lord's alignment can change according to some story decisions that you make.

The Ali. item will do next to diddly. Don't count on it.

I'm sure there's more, but this covers the "basics." Let me know if you have any other questions!