From my understanding of the text (and Ancient Greek culture and mythology), ethics didn't really come into play when considering the motivations of the gods. They simply acted, and humans had to suffer the consequences. They were the lords, and the Greeks and Trojans were their servants. Sort of. But you can see how the metaphor extends to Agamemnon and the other Greek rulers! I don't believe the Greeks believed that either Agamemnon OR Achilles was right, but that they both were. Agamemnon was justified in demanding respect from Achilles because he was a king, and therefore entitled to respect and rewards from combat greater than that of his subjects (of whom Achilles was one). Perhaps he could have been more fair and less stubborn, but he didn't have to be. It just would have been nicer. On the other hand, Achilles had the right to want the spoils of war that he had claimed, as befitting a lord. Personally, I think Agamemnon would have been wiser to take the slave girl from one of his vassals who didn't have a goddess for a mother.

I think it's more correct to say Hector and Priam are supposed to be viewed sympathetically. The Greeks are justified in attacking Troy because Paris abducted Helen, but Priam and Hector are not responsible for that. They are right to defend their kin (Paris, their loved ones, their subjects), so they're not considered bad people for standing against the Greeks. Even Paris isn't strictly considered a "bad" person, because he was given Helen as a gift from the gods. He is generally portrayed as weak and cowardly, however. In the "Age of Heroes" this is the worst you can be. That, or a moocher (see Penelope's suitors).

Since the other responses don't touch the Odyssey I'll jump in. While Odysseus is the protagonist and Poseidon is largely the antagonist in some way or another, the story as a whole is a huge cautionary tale about arrogance and angering the gods. Odysseus takes so long to get home in large part because he feels the need to tell Polyphemus his name rather than simply making his escape, which allows Polyphemus to ask Poseidon for proper revenge. His crew is later killed because they ate the sacred cattle of Helios, another affront to a god. Odysseus himself survives and conveniently ends up with Calypso on Ogygia. I say conveniently because Calypso is only there because she is being punished by the gods for being a daughter of Atlas and siding against the gods in the Titanomachy. It's been a while since I've read the Odyssey so I may be forgetting some pieces, but those are all important thematically. Odysseus is sympathetic, but not exactly a role model "good guy".

Did Homer intend characters to be "good" and "bad?" Are my conceptions based more on the translation or or were these traits intended in ancient Greek?

I'm not familiar enough with the matter to debate the issue itself but if there are "good" and "bad" characters then you would have to consider that "good" and "bad" might have meant fundamentally different things to Homer than they do to us.

Ever since E. R. Dodds' The Greeks and the Irrational (1951) the society encountered in Homer has generally been described as a shame culture as opposed to the guilt culture that we (and the Greeks after Plato) are most familiar with.

In a shame culture it's the publicly observed results of your actions that matter, not the intentions motivating your actions or whatever it is you are doing when nobody is looking. Thence the Homeric heroes' obsession with honor and fame - if others don't recognize your actions you might just as well not have acted at all.
The Ring of Gyges can be used to exemplify this distinction. Gyges is highly successful by shame culture standards but fails miserably by the standards of a guilt culture.

From this point of view the question of morality comes down to whether a character is acting in a justified manner in the eyes of his peers.
When you say "Agamemnon is acting like a dick" then you are presumably referring to the supposed motivation behind his action (jealousy of Achilles or w/e) and not to the question of whether the action itself was justified or not (did Agamemnon have the right to take the girl?) and its perception by his peers (might Agamemnon have looked weak for tolerating Achilles having her?). According to Dodds this would be a highly anachronistic point of view.