I'd like to know as well.

Why I enjoy the KOTOR timeline in general, I find that it doesn't feel like morality is being shoved into your face much unlike the films. Instead, it's more realistic in its approach, the fact that the universe is full of shades of grays, not absolutes of black or white. But personally, I find the Jedi hypocrisy to be a much bigger evil than anything displayed by Sith & their "pacifism" is a principled evil IMO.

Logically, a selfish person still cares for those of use to him/her. It is a myth/lie that selfish people don't look out for others, even in every-day life.

If the "big bad evil" Empire is hypocritical, then what's new exactly? It's expected to be that way. But the Republic? It is expected to be a paragon of virtue, so the hypocrisy does & should effect it (which KOTOR's entire storyline highlights).