Set in a medieval-type fantasy world, of course....because I like it and that's why so shove it!! It does't have to be like Europe/England like so many games do, but good ol' swords and lower technology!! For simplicity, though, I'd want a low-to-no magic world.

where you could be good or evil, but you didn't end up being an "evil person" forced to play the hero. You pick a side in the conflict and further your interests however you see fit. The alignment system would be a relatively fluid set up that would allow you to be both brutal and subtle (whichever alignment you were!) One of the most boring parts about being evil in a lot of games, is you're really just being an "asshole", and any attempt at being subtle and manipulatively evil ends up being mostly in your head since you have to pick the "good" choices. Which is what a subtle evil political minion might do, but the games usually then start labeling you as "good" even if you do these things with an evil motivation. Conversely, if you want to play the brute, your brutish decisions should cause people to treat you as a brute NO MATTER your alignment. Basically, my game would have an substantially more complicated system for dialogue and interactions that probably isn't practically effective!!

Additionally, the rogue/assassin game mechanics would be (imo) better. Assassin's Creed actually nailed the more active parts of being an assassin down for mechanics. I liked those. But I'd add in mechanics for other things like poisoning food, and arranging traps. One also would not have to be an assassin, and I'd like the various rogue behaviors to be as wonderful to play like Assassin's Creed, but without being too difficult (eg. I wouldn't do ridiculous puzzles to pick locks. Maybe simple puzzle with varying difficulties, kind of like Bioshock does).

And because It would be a political conflict, I'd like to have the ability to do a bunch of actions that could be performed to further an economic goal. Bribery, torture, persuasive speeches, etc...etc...

In the end, I think it'd be one of those games that to be fully immersive would end up being a bit too complex, or would be less immersive and have more implications about your actions. I've actually played a few NWN player-created games that came very close to my ideal here in terms of interactions and plot.