Well I was talking simple, easy improvements for a developer, though if we consider ideal situations a dynamic system is definitely best.
A middle road would be if some races simply cared less for the whole "reputation" thing in the first place. Then reputation can genuinely cover human-like morality (which lorewise is definitely shared by many races) and races/governments can decide to which degree they care if at all. The "good" governments/races would not realistically condone large scale genocide (bombardments/exterminations) except against the most heinous and uncompromising races like the Shakturi. As such reputation makes sense for them, though killing evil races ought to have less impact than neutral/good ones.
Also I do think the Sluken would care if Gizureans were killed, not because they consider their lives sacred of course, but because they'd consider genocide targeted at insectoids a threat, and the Gizureans might be considered a potential ally which would be missed not to mention that if there is already a semi-consensus amongst the "civilized" races then even the races that don't genuinely care would loudly proclaim their condemnation. Slukens might be more indifferent to the death of humans/Atuuk/Ackdarians or other races likely to cause them nothing but trouble.
But yes, ideally each race would receive a "condemnation" modifier which depends on their individual dislike of the enemy race as well as murder in general. It wouldn't be a general reputation value but a modifier to the diplomatic opinion of all other empires separately in relation to the guilty empire, and then some things might take a few years to forgive while others might take centuries. Like how opinion modifiers work in Crusader Kings 2.
Also your Haakonish comment in regards to real estate reminds me, planets heal too fast! Especially if a planet was bombed to somewhere around zero percent it should take several decades before it's even reasonably useful. If fact it should take centuries, but maybe just a decade or so IF the terraforming facility is constructed. Then maybe that facility might have some use, considering how useless it is right now.