Alignment. In-World, is it subjective? Are Illithids truly evil?

[LibraryOgre]

In a fantasy world where the gods are real and interact with humanity on a regular basis morality (alignment) MUST be objective. Want to know if something is Good or Evil, just ask the gods. In fact, in most fantasy, it is quite easy to tell the good gods from the bad, they advertise!

I don't think this is necessarily true... I can certainly see a setting where the Gods are real and individuals, and good and evil remain subjective. Babylon 5, for example, the Vorlons and the Shadows weren't quite gods, but both believed that their methodology was correct. While Shadows were presented as evil, that was arguably a matter of point of view, and we saw, in the course of the series, that the Vorlons were also quite willing to be monstrous.

However, I don't think that's really possible with the standard cosmology for D&D, where Good and Evil wind up objectively affecting real estate.... if your town in the Plane of Concordant Opposition winds up becoming too Lawful and Good, you slide to Arcadia or the Seven Heavens.