How can a game designer/storyteller get around this problem? Open-ended game design is a solution, but often only a partial one. Yes, you can spend days being a law-abiding pizza-delivery boy in Grand Theft Auto III or a humble fisherman in The Legend of Zelda, but if you want to move the story along, you have to go down the relatively narrow path the game proscribes - i.e., defeat the bad guy.
Eliminating the predestined defeat of the enemy often means eliminating the story altogether, leaving the narrative and goal to be defined completely by the player, as in most simulation games. In theory, this opens the game up to unlimited scenarios, but in practice all it really does is add a "you lose" ending to the "you win" of more linear games. Allowing your people to be overtaken in Civilization does indeed subvert the traditional storyline, but not in a way that's fully satisfying to most players. ("I'm glad the Romans sacked my capital. They obviously wanted it more.")
But Civilization's multiple selectable nation-states demonstrate one way to make a sympathetic antagonist in a game - namely, making him the protagonist. While videogames are limited by forcing the avatar's point of view on the player, they are also superior to other media in that they allow the player to truly experience a conflict from all sides. While a movie can let you into the mind of a villain, a game can let you truly walk a mile in his shoes.
Multiplayer games have exploited this advantage for years - while it's possible to argue that StarCraft's Zerg or World of Warcraft's Horde are the "evil" side of those games, it's not an easy argument to make to a devoted player of either race. Even simpler games can exploit this difference - M. Bison is an unplayable "bad guy" in Street Fighter II, but once you can control him in Champion Edition, he becomes just another potential avatar in the fight against all comers (even though his ending reveals that he wants to wrap the world in "the darkness of one man's evil").
Single-player games make balancing the morality calculus more difficult. While it's easy enough to allow players to choose between a good or evil character at the beginning of a game, this choice again locks the player into a single point of view, requiring the player to replay the game multiple times to fully experience all sides of the equation. Games like Fable and Black & White partially fix this problem by allowing a player's alignment to change throughout the game, but at any one moment the player is still only experiencing one side of the dichotomy.
How do you combine the personal experience of the game and the detached gaze of the camera? One of the most daring experiments in this regard is Indigo Prophecy (Fahrenheit to our European readers). Though players start the game as possessed murderer Lucas Kane, the point of view jumps quickly and often between him and police officers Carla Valenti and Tyler Miles, who are investigating his case. Actions performed as one character affect the success of future missions by the others, and in the beginning it's unclear to the player which character, if any, he should be rooting for. Are the police the bad guys because they try to thwart you as Lucas, or is Lucas the bad guy because he's trying to thwart you as the investigators? It's impossible to choose, because they both represent you, and what self-respecting person thinks of himself as the bad guy?