I like all these questions. Sorry for such a late reply, if you're even still interested.
As for the first part about why we have the words, I see a lot of words out there that don't map directly to any real thing. Words like 'unicorn' or 'elf' come to mind as well as grammatical tools like 'the' or 'of', granted those last two aren't even nouns.
I also don't really consider any third option, like you mention. Moreover I don't think we are partly both, given that I categorically deny each of them.
One crux of the issue is that moral terms like good, bad, right and wrong seem to me to enable intellectual laziness and promote unexamined worldviews while serving as ready vehicles to manipulate the minds of those who get emotional about these moral concepts or believe in them for whatever reason.
It's kind of like how writing instructors sometimes advise that one avoid cursory one word descriptions of feelings ('happy' or 'sad') in favor of more articulate and thoughtful descriptors. In a similar way to making one's writing more effective I think that discarding moral terms (and indeed morality in total) in favor of more elaborate reflection can help make one's cognition and perspective considerations more effective.
I'm saying almost nothing of the epistemological concerns I have with morality and ethics, mind you, which I find stickier still. Instead here I argue against their use, which seems to me a bit more tangible and approachable position, if not quite as defensible.
RE: Gov't, Lies, and Internet Legal Theories