I've seen a lot of MMOs in the past try and take the piety out of the Paladin. The whole duality of man story of the priest who is secretly angry and evil. Please consider steering way from anything that even hints of duality. The whole concept of the paladin is piety. I would like to see the Paladin follow that pure path.. lawfully good, period dot.
As to abilities, in following my above statement I would like to see the basis of all abilities be 'light'. Whether it's a lance of light focused on a single target, or a sphere of light around the Paladin that affects friend or foe. This light should be visible enough (think radius of torch light rather than circle on ground) that it's obvious who is being effected by the sphere. I would love to see the *radius of the sphere* of light grow over time with level AND deed. That sphere might also gain more simultaneous effects as the power of the Paladin grows; The sphere of light for a lower level Paladin may only be able to maintain a single effect (friend or foe) at one time. As the Paladin ascends in power, so too do the number of effects that can be contained within the ever growing sphere of light around him (or her.. single disclaimer). The effects should have to be actively maintained by some means.. think Bard, but not quite. It would be nice to have the ability to focus the effects through decreasing the radius if necessary.. for instance, if a very high level paladin has a pious light radius of 50m, he may be able to focus it back to 10m to increase the effect on those within it. Higher abilities might require a pilgrimage to a holy place.
Deeds effecting sphere of light; if a Paladin chooses a quest branch that results in the death of an innocent(raw example), that Paladin's sphere of light is diminished somewhat until the balance is brought back by pious deeds. In the inverse, if a Paladin's 'cup overfloweth' so to speak and his balance of good deeds exceeds the typical balance, he is awarded special blessings. A kind of karma system based on an individuals deeds. It would be great to see a build up of pious karma based on small deeds such as generosity during battle, or another pc /thank Aradune... or something similar.
A Paladin's shield; it should have the ability of a holy focus, to allow slightly stronger or longer held abilities. This should be sufficiently valuable to sway the Paladin from using 2h or something inconsistent with the shield. Those who choose not to use a shield (because dual wielded scythes looks soooo cool) should covertly pay the price of diverging from the path by lacking that holy focus.
Oh! .. and holy water as a consumable resource.. for some purpose.