does good/evil have any effect on the game?
None as far as the story goes. RP-wise you can make decisions that are both good and evil although the game doesn't really distinguish between the two. However there are many items in the game that are alignment specific.
What are bards good for?
Extra spellcaster that can also fight and wear the really nice Elven Chainmails in the game. They can also pickpocket (not that its needed), and they have Bard-only instruments which are pretty good.