Well, giving us info on the 2nd Era of Tamriel is rather difficult. See, the whole reason this game takes place in this Era is that nearly all of the information about what happened during this era was lost in the chaos, confusion, wars, and turmoil that swept through Tamriel for centuries until Tiber Septim conquered his Empire and founded the Septim Dynasty. So the lore that's in the game is the entirety of the lore of this era because the previous canon lore on the era was that it was a period of war and disruption about which very little was known.

Incidently, this is why no one in 3rd Era Tamriel looks at each other when Mehrunes Dagon starts opening Oblivion Gates and trying to take over and says "Didn't Molag Bal try this 600 years ago?" No one says this, because no one knows the Planemeld happened. All of the glorious (or notorious) deeds of our Vestige are lost to history. (Entities with enduring memories like the Daedric Princes and the Tribunal would remember, and I'm sure that the Daedric Princes will have ESO easter eggs aplenty in the next single player game.)

However, for in-game lore:
https://www.imperial-library.info/
http://en.uesp.net/wiki/Online:Books


As for alignment:
Past Elder Scrolls games have used a Reputation system where you could gain renown and reputation for doing certain quests and perhaps gain Infamy if you were of a more evil bent.
Morrowind's Reputation system: http://en.uesp.net/wiki/Morrowind:Reputation
Oblivion's Fame & Infamy: http://en.uesp.net/wiki/Oblivion:Fame http://en.uesp.net/wiki/Oblivion:Infamy

Please note that these were not an "alignment" system in the sense of D&D or Mass Effect's Paragon/Renegade system. In Morrowind, Reputation measured your popularity with the people and with factions. Doing quests for rival factions or failing quests could lower your reputation with your faction. Reputation determined your advancement and with a high enough repuation could enable a shortcut in the main quest. In Oblivion, Fame was all about how heroic you were. It affected NPC disposition, some quests were activated after you reached a certain level of Fame, and accumulating enough Fame let you use the Heaven stone buffs. Infamy, your notoriety for evil deeds in Cyrodiil, also affected NPC disposition and along with fame determined which heaven stones you could use. Characters with more Infamy than fame could not use altars of the Nine Divines, and if your Infamy was greater than 1, you could not wear the Relics of the Divine Crusader without clearing your infamy with a lengthy pilgrimage.

So to get back to your suggestion...
Reputation would be an interesting system to bring to the game, however I suspect the developers would be loath to introduce gameplay benefits to such a system. Adding gameplay benefits would benefit veteran, experienced players and make it harder for new players to catch up, something that ZOS generally tries to avoid doing.

However, the system of achievements, quest-related costumes/skins/polymorphs, and titles seems like ZOS' version of a reputation system aimed at other players. When I see a player running around with Cadwell's pot helm on, I know they've completed Cadwell's Silver and Gold. When I see high ranking PVP titles or the skins and titles for difficult trial clears, I have a way to see that player's reputation. And when I run around with the Dark Brotherhood Silencer title on my assassin, I'm making a statement about her reputation as well.

Serving the Divines or Daedra might be best implemented as a new World Skills line, accessible by everyone, similar to the Legerdemain line or Fighters Guild. Typically in past games, the Divines reward their followers with short-term blessings from shrines and the Daedra reward their followers with artifacts, neither of which has an easy way to implement in the game. I personally doubt that ZOS plans on adding new skill lines outside of DLC/Chapters because of balancing issues, but its an interesting idea.