The morality system does work, but GMs need to be very deliberate in triggering it. If someone wants to play a light side character you have to actually challenge their morality.
For example, the Jedi character has an audience with a Hutt. This is the morality character dealing with a very immoral creature, so if you let the player simply talk to the Hutt and go about their merry way you're not GMing the morality system correctly. Staying on friendly terms with an evil gangster must be difficult for a morality character! For example, the Hutt throws one of his slaves into a Rancor pit right as the Jedi walks in. Simply watching this happen will cause conflict, but stopping it might cost you the Hutt's favor.
When you GM the morality system correctly inaction causes conflict. It's the violence, suffering and injustice in the galaxy, and how hopeless standing against them seems that drive the majority of conflict for someone who's trying to be good.
Edited by Aetrion