Here are some ideas to take it a step or two further...
From my experience on the boat, many people performed at their peak when we sensed danger to our well-being. But some (very few) had an opposite reaction and would lose focus when they were scared. If they really wanted to create a dynamic crew in-game, they could model this. When the depth charges come, some people could operate better, and some people would slip up a little. During the boring times, some people are happy as could be and others get complacent and even mischievous. If this were modeled in the game, then your performance as a skipper would be reflected in the abilities of the crew.
My skipper personally looked over our battle-stations list and hand-picked many of the key players on it. Adding things like this to the game would make sure you're paying attention to your crew without having to listen to the same old stories over and over.
Another way of making it more dynamic would be to have these personality traits change over time as the sailor matures and becomes more (or less) confident in your abilities to run the ship.
You could also have the player make decisions like how often you drill or have training. More training would improve abilities, but too much could drop morale, so you'd have to find that sweet spot where you get the most bang for your buck. And the sweet spot would change according to the personality types of your crew. The key to it would be to keep everything dynamic so it would be different for each player and would change over time too.
They could even give you situations that you have to deal with, almost like the classic game "The Oregon Trail." For instance, you get informed that a crewmember disobeyed an order from one of your officers. Do you: A)Verbally reprimand him. B)Reduce him in rank. C)Tell the Chief to take care of it, etc.
How you respond to this situation would affect the development and morale of that individual sailor, and possibly the rest of the crew... after all, word travels fast on a boat.
Granted, some might see this type of thing as too RPG-like and detract from the main purpose of the game, which is sinking ships. That's why there should also be options with this feature. You could set it to "auto" if you don't want to deal with any of these things. Or you could choose how involved you want to be with these issues using a screen like the "realism settings" screen.
I agree with the OP... the morale system has huge potential. It just has to be implemented correctly.
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