Yes. As of now, alignment is strictly cosmetic (including some gear accessibility). There's been some talk about them implementing some sort of alignment mechanic in the Legacy system, but the details are sketchy and it's probably a year away at the earliest. There's currently a petition by the fans for them to make it more like the traditional KOTOR alignment system in that you're alignment effects your skills--i.e. a Sage with Dark III or above would use force lighting, etc. Though I suspect it will fall upon deaf ears. It would take a lot for them to implement it. Really, it should have been part of the initial game. It sort of seems like a "well, duh!" thing to me.
I would agree, though, that the game is in a bad state ATM. The overall population isn't dwindling as bad as some seem to think it is, but there are just way too many servers. Certainly some people left for good. Others left until some things get fix. But mostly people just aren't playing 12 hours a day everyday like they were in January. People just need a break, have gotten on with the other parts of their lives, plus the weather has been really nice lately in most areas. So the "constant" population is considerably lower and with people being so spread out, things seem to be way more deserted than they really are.
As for the gear, the orange modding thing does work more or less as intended. (At least from 1-49.) There is (so they say) an orange for every model in the game. Though most of them have to be crafted and some can be really, really hard to obtain.) But presumably you can craft any armor set and just mod it up as you level. However, once you hit 50 things are different because most of the best raid gear (and best PvP) gear can't have their mods fully extracted. 1.2 fixed some of the problem, but overall the system is still only working at about 85% functionality. They say it should be all good when 1.3 comes around. There's also plans to implement color changing and maybe even a full appearance tab.
However, log prime time Saturday or late afternoon Sunday and things don't seem as bad. I suspect that should Bioware fix some things, it will get better. They've also promised server transfers sometime this summer. That will help a lot! So once fall comes around and people come back inside, I think the game will be in a much better state.
I myself am having a hard time justifying playing. I too paid for six months. I've already missed a bit because (as I stated in a few other posts) I nicked up my hand really bad a little over a month ago and haven't been able to play much. Plus, before that I had been mostly playing STO (since it went F2P).
And before that, I had only got my Legacy to 4. I had plenty of time to grind out the last two levels to get the extra free month, but I just didn't care. The population thing just kills if for me. And I really don't want to server jump AGAIN. I did that so much at launch because I'd been following various friends around.
So once they implement transfers I'll probably start playing more regularly. I wish you could suspend accounts. But since you can't my last few months are probably going to go to waste. At best I'll probably log in a few of the busy nights for some PvP fun.
And I really encourage you to give PvP a go. I was like you where I was really unsure about it at first. But once I "got it," I found it to be endlessly fun. Mind you, I got facerolled a lot at first and had many growing pains, (and still have a long way to go), but at least now I manage to do fairly well and have a lot of fun.
For one thing, I think you're looking at it the wrong way. Think of it like this: If Luke and Han were sparring, do you think Han would just stand around and wait for Luke to bash him over the had with his lightsaber? No. He'd run around, dodge, take cover and try to get behind Luke to blast him in the back.
Unfortunately, you just started at a really bad time. 1.2 really did a number on PvP. They just trying to implement too many balancing changes at the same time. The net result was a HUGE nerf to the TTK (Time To Kill or the average time it takes to defeat another in a 1v1 situation). If you read the PvP forums, better than half the threads are about it. Bioware has more or less admitted the mistake and are scrambling to rectify it. In fact, scuttlebutt is the guy in charge of the PvP stuff is to be sacked once things get settled down.
Thing is, it's not as bad as some make it out to be. People just die a lot more than they used to. The problem is, that can be really discouraging to new players such as yourself. Which is really bad when the have such an open campaign to bring in new people.
But that doesn't mean you can participate. Just don't think if you die a lot it's your necessarily your fault.
If you want some tips, though, I can help. Though first I have to know what your AC is. Did you pick Guardian or Sentinel? Gaurds are one of the best medal farms and Sents are the current kings of PvP. But I know both, and both can be really effective with some practice even at level 11.