Recently, I commented on one of Heather's articles that I generally prefer the horror stories of past centuries to modern horror.
That's not because modern horror is more brutal, graphic, or callous. In fact, the sadism and unrestrained malevolence of films like Hostel and Saw are nothing new. Hundreds of years ago, books like Zofloya and The Monk revelled in that sort of stuff, too. There was more of a demand at the time that a story's evil-doers are eventually punished, though. No, the main difference that makes old horror stories more interesting is that their villains were better than modern villains.
One movement in modern fiction has been to make antagonists more sympathetic. Many people don't believe in good and evil in the way folks did centuries ago, and completely malevolent characters are thought to be unrealistic. So modern authors try to justify the villain's actions or personality to some extent; to explain how the innocent character was corrupted by an unjust world. He was betrayed, neglected, abused, brainwashed, or made wicked by some other terrible events. The audience is meant to pity him or to, at least, attempt to understand him.
You know, it's funny... I hadn't made the connection before, but the emphasis on realism in Western gaming is actually part of a bigger picture. Read literature from the 20th century or watch films from the 1930s and '40s. You'll notice that realism wasn't valued so much back then in the arts. It's only modern audiences that can't understand the value of fables and fairy tales. Maybe games can help people regain that understanding.
Unsympathetic villains can be valuable for many reasons, such as symbolism. But their greatest strength is that they focus the audience's emotions into something certain and definite. Sympathetic villains muddle the audience's feelings. Unsympathetic villains keep feelings clear and sharp.
Mixed emotions can be powerful, but they're not great motivators. Clear emotions are powerful motivators.
If your game is about puzzling out a mystery, then mixed emotions are fine. But if your game is about overcoming evil or defeating a particular antagonist, keeping your villains entirely villainous will offer a more powerful experience to the player.