You have it partially right. There should be situations in which diplomacy and niceness achieves your goals; and times when ruthless pragmatism should be more effective. Good leaders understand the psychology of there adversaries and allies alike, and act accordingly. It's time RPG's start recognizing this. They sort of had this going with ME2 in the way you dealt with the Krogan. In their world being aggressive and ruthless evoked a more positive response. But it was never expanded on and the whole P/R system restricted you to primarily be one or the other to optimize a playthrough.
The distinction between paragon and renegade needs to be eliminated because of this. As I've stated before, it should a system more akin to Idealism vs. Pragmatism: I break it down into a system of normative ethics, with the idealistic responses using more of the deontological system of ethics (what is right?), and the practical responses using more of the teleological system of ethics (what is good?).
Practical responses would also tend to delve more into meta-ethics and the language behind morality and ethics (what is moral?).
In short, idealism would do what is right: deontological ethics focus on doing what is moral based on some predetermined code or principle(s) that establish what the right thing is from the get go. It is the more uniquely "Paragon" system, though in many, many ways it comes with the expense of being more rigid, inflexible, morally dichotomous (black and white), and unable to adapt to complex moral or ethical quandaries. The guiding sentiment here is "The means reflect the end."
Pragmatism on the other hand focuses on what is good: teleological ethics are more concerned with doing the most amount of good, of minimizing suffering, and of maximizing pleasure. It utilizes utilitarianism and virtue ethics. It could be more of the "Renegade" system, but is by no means at all limited to them, as Paragons can easily utilize teleological ethics if the situation calls for it. That said, Renegades, who usually tend to be the much more practical and rational types, basically find their purpose here, especially when they implement meta-ethical language into their speech ("what is moral anyway?") Teleology is much more of a bastion for the practical and rational thinkers who will do whatever it is they have to do in pursuit of the end, the mission, the goal, the bigger picture, etc. If they have to broker a sensitive diplomatic deal to advance their goal, they'll do it. If they have to experiment on child via vivisection to cure a disease, they'll do it. The downside is that what they might have to do can very quickly become totally and completely abhorrent and terrible, and they face a lot of issues from people who think that their methods are extreme, sadistic, and psychopathic. The guiding sentiment here is "The end justifies the means".
And of course, it'd be more than possible to have a blend of both, and there hopefully wouldn't be some B/S karma meter that keeps track of your morality and closes off what options or dialogue you could use.
I guess what I'm saying is that neither diplomacy or violence is really indicative to either idealism or pragmatism. Both will utilize both options: However, the idealistic person is the gal who is more likely to try and work out a peaceful solution to a problem that isn't necessarily better solved that way, especially when pressed for time, whereas the practical guy would just bulldoze over the problem to spend as little time as possible working out the solution.
Shoot, what I'm saying sounds exactly like the current P/R system.
What I think we need is more ending decisions, where there is a lot more ambiguity and complexity and no-clear-cut answer that doesn't have drawbacks.