1. I know fame can fade over time, but does karma?

2. Can karma be maxed out, and if so, what's the best, most efficient way to do it? Demons?

I don't think Karma will ever fade...it can be maxxed out. Evil Mages are one of my fav up to Illustrious (or, second to highest...4th? level fame), but the spawn rate is slow. I think most people do Succubus or Ice Fiends, but Daemons will get ya to Lord too.

I'm scared to try, but I did finally make a GM mage, and he seems far, far more powerful than my smelly warrior (now titled GM Sissy). I know demons can be found in wind, accoring to another post I found, but I'll need to learn where to find the other two.

Well I was doing okay in wind until a Greater Dragon came by... lol.

I feel I must correct Lord NANOC a bit here. Fame is what gets you to Lord/Lady, regardless of karma. What karma does is determines more whether a person is Glorious or Dread or something in between.

Here is a link to the chart to determining someone's title:
ORIGIN - Ultima Online - Playguide

My cousin and I have both maxxed out our karma. She did so with Ancient Wyrms and lich lords. I prefer to battle the paragon daemons, which would sometimes give me a little karma until just recently.

You loose fame with death. The only ways to loose karma is killing a blue (PKing), killing pixies, unicorns, kir-ins, and meers and maybe some things I am forgetting. Also you loose karma by casting certain spells, like those with necromancy and summoning deamons.

I hope this helps.

BTW, daemons can be found in pairs in different rooms of Hyloth and Fire. They also are found in Ileshnar, along with their paragons just north of Compassion. Also on the second level of Terot Skitas and Then there is the Hedge Maze and Daemon Temple where there are more than just 2 or 3. I think the Hedge Maze is down to only 3 at a time, but I have not been there in quite a while. The Daemon Temple spawns up to 8 at a time.

Killing demons is fun with energy vortexes, and they give a lot of gold... just never have time to go through the loot before the nasty scum respawn... hey this ain't so bad. I see why mages are so popular now. I bet a mage tamer would be an even bigger bad@!& I may make one of those.

The Kingdom Rebord client crashed on me three times while in Wind. I'm lucky I was invisible.

I might try out the Ilshenar demons, I am already up to glorious lord. I just wonder when I'll stop gaining a lot of karma and fame from demons, and is there anything that gives more than them?

Isn't Glorious Lord the highest attainable level?

I suppose, but why does karma keep going?

As I posted previously, lich lords and AW's tend to give more karma, and of course, the paragon daemons. I do not understand why, but balrons don't seem to. And it goes up and up until you get "some" then "little" but eventually it CAN be capped because I've done it!

'Tis a good question, but I believe the true answer has most likely been lost in the mists of time and the constantly changing pool of dev's.