For me, the problem is NOT what you do in-game, but what are you going to do in the real world AFTER playing the game. There were people who, inspired by GTA and other violent games, they went out in the streets shooting pedestrians. Of course, these people are the exception and not the rule (thank God!). But the psychological impact digital violence can have into even a single person is something that must not taken lightly at all.
About management simulations like Civilization or SimCity, I think the point is to achieve an ethical victory and not just a simple victory. "Why?" you may ask. Because, for me, video games should NOT be just plain fun or entertainment but a form of education instead. Indeed, those sprites are just sprites and people are not real, however have you ever considered the politicians, bussinessmen and economists of the world may view us like nothing more than "sprites" and the whole capitalism like a "simulation game"? If you consider their decisions, obviously they treat us like nothing more than statistics... Same goes with RTSes; how many times real historical figures have achieved victory by sacrificing thousands of people no matter the side they belonged. Once again, they treated people like RTS units; feed them, train them, equip them, then send them to their own death for the sake of their megalomania.
Ok, I know what you think. "RTSes or Civilization didn't exists in the middle ages to inspire the Kings or during the rise of the Capitalism to inspire bussinessmen."; true, but there were always real-life simulators, from Chess-like board games to strategical & economical books and discussions; either way, people in power used their "simulations" egotistically, leading them to treat real-life people like mere statistics.
Furthermore, what about God? We are literally nothing more than mere "sprites" in front of his majesty and power (considering God exists). If we treat things we consider lowly with the worst way possible, then why shouldn't God theoretically release all His sadism and evilness upon the world? After all, He is playing His own "Civilization", let Him enjoy His game, make humanity suffer!!!
Another reason an ethical way is better than an unethical one is entertainment. In 99% of games, an ethical victory is much harder than an unethical one, if even possible. I had that "possible" issue with Oblivion; I played like a Bard, who is supposed to follow an ask-questions-first-and-draw-swords-later and he is skilled in diplomachy and negotiation, but in the end I had to kill the bad guy in every mission of the game, no matter how hard I tried to negotiate stuff, with the exception of a mission on a ship. In other words, the game
forced me to kill, despite the fact it was a free-character-development RPG. And when I think about games like Iji or GeneForge RPG series where everything can be solved peacefully and ethically, though everything is much-much harder that way too, and I am pissed of by the way unknown games are much better and more ethical than the mainstream ones.
Of course, we absolutely should NOT treat videogame characters like real people (this is not good for our mental health either), but feeding your sadism and ego via videogaming is not heathly either. Videogames are a "tool" which if used egotistically are going to harm both you and your environment but if used wisely they can highly educate you.