How the mighty do fall!

[Althern]

Without some form of limits placed by someone higher on the pecking order, we'd go completely crazy.

This argument implies that you completely discount the importance of self imposed limits. These limits, otherwise known as principles or morals, have a greater affect on human behaviour than any imposed by legislation or the social contract. To choose an extreme example to demonstrate an elementary point, it is within my power to murder somebody, but I choose not to do so, not on the threat of any legal sanction, but rather on the revulsion I would feel for the violation of a core tenet of my morality. In this case, only a sociopath would act in a way that tested these externally imposed limits. The examples you present are of children and teenagers whose moral development is incomplete, and who have immediate authority figures imposing a code of behaviour that they would like to see emulated. To extend this kind of argument to the overwhelming majority of adults is erroneous.

To return to the topic, a description of a group of people behaving morally, but not heroically, is at variance with the requirements for interesting narrative. I argue that people such as Saruman are necessary for an appealing story. There are many more examples in the books of individuals remaining true to their principles and achieving their goals, which would imply that this is a stronger theme than the corrupting nature of power (with the exception of ring-acquired power of course).