AMFV, I’m not familiar with D&D v3.5. That came out in 2003, which was a loooong time after I stopped buying rule-books. But I agree that orcs and goblins have gods, may have souls and may have an afterlife.
I don’t understand why you mention sentience and intelligence. I didn’t mention it in my previous post. I agree that orcs and goblins are sentient and have some intelligence.
But neither of these points matter. It does not matter whether or not they have souls or an afterlife. What matters is not what you and I and the OP knows about orcs and goblins. What matters is what the characters (PCs and NPCs) in the game know, or believe, about orcs and goblins. Only what the characters think should influence their behaviour.
In the D&D campaign worlds in which I played and DM’ed, the fact that orcs and goblins were creatures of the dark was enough for the PCs to avoid any mental anguish about destroying them. The PCs knew nothing about any gods that the orcs and goblins worshipped, so it didn’t affect their decision-making.
Even if the PCs had known about orc and goblin gods, and even if they suspected that orcs and goblins might have ‘souls’ (or something equivalent), I don’t think that would have altered their behaviour. In the D&D campaign world that me and my friends created the head of the human pantheon was a god of light and the sun. Any creature of the dark was condemned. Because orcs and goblins were seen as evil by nature, and because they continually posed a very real threat to the human and demi-human inhabitants, it was the duty of the PCs to kill them whenever they were able to.
I’m not suggesting that the OP adopt the same approach. I’m suggesting that the OP needs to define the ethical system for his own campaign world. Posters to this thread can offer the OP all sorts of suggestions, but it’s got virtually nothing to do with Catholic morality.