I took the moongate south of the starting town to New Magenta, then again to a place left of Britannia city. I am getting attacked by hostile paladins. Did I trigger something?

Hostile humans randomly spawn in some locations, including on the road west of Britain. I believe hostile humans would spawn on the road in that area in Ultima VI, as well.

These are not just humans they are named "Paladin". It feels like I did something wrong.

They can see the future and are offended by the Ultima 9 Avatar being stupid enough to actually ask "What's a paladin?'.

They saw your -30 rep and declared a holy crusade against you.

Are you playing vanilla or Exult?

In Exult's latest versions the Paladins definitely don't attack the player (unless attacked). But I think they did in earlier versions.
It's been a long while since I've played vanilla; I'm still pretty sure they don't attack players there either, but yeah, it has been a long while.

No need to worry about killing them; you're not penalized for it. It's not okay to steal, but it's okay to massacre Paladins.

Vanilla. I guess they are just random encounters since they seem to respawn. I thought they were defending a hidden camp or something but they just roam.

If they start the fight, then it is valorous to engage in combat and honorable to end these bandits.

It is, however, okay for your companions to steal. That damned Iolo, such a klepto.

Indeed. I guess the rule is that it's okay for everyone to steal, as long as you're a registered Britannian.