You know, gameplay speaks more than background informations.
No matter how you spin it, your gameplay seems to be very similar to what is usually seen as an evil race (killing all that moves, using the soul of the fallen).
All we are saying is that putting a backstory of serving a god rather than a devil doesn't make a race being on the "good" side.
In theory, no race in DF is really "good", even the elves have a lot of story of massacre and eating corpses in their stories, and there is no real "bad" or "evil", when even demons can lead other civilizations to hundreds of years of actual prosperity.
I personally like it a lot, because it contrasts a lot with most of the fantasy of good vs evil black and white worlds.
You will note that the races the least inclined to the evil ways are called 'civilized', not 'good'.
By the way, if we follow your reasoning, shouldn't other groups of those "paladins" go after other groups of paladins too?
I mean, they are committing atrocities all around the world, killing entire population they themselves labelled as "evil", to loot their wealth.
Well, we are all going around, because no matter how you spin it, a civilization based on mass murder can't qualify as "good" for at least some of us, "for greater good" and "fighting evil" are something that's been used a lot, in our History, to massacre innocent people and non combatants.
Some of the worst atrocities around the globe have been (and still are) in the name of "god" (or whatever name it has), to punish evil.
Your example of the Spanish is pretty much what I mean too, greedy people manipulate others in the name of "good" to enact some of the worst acts the human race is able to commit.
As you can probably tell, I don't really like people that try to justify killing by posing as saviors or good people, and I'd rather not have it in a game, unless it is actually justified to have such things.
In the end, I'll just do like I did for the banshee (and probably the wasps, when they come around, for other reasons), which is simply disable them entirely.
Just a thing, no matter how you intend to do things, you should change the title to reflect that it's more about fanatics, or "crusaders" if you prefer that term, than "good race", because it seems that I'm not the only one to be mislead, ensuing a conversation that don't actually help anyone in the end, right?