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He does judge those around him-just like every other human being. Remember, just because someone is narrating a story, doesn't mean their point of view is reliable. In fact, immediately after telling us of his ability to reserve judgment, he complains of being “privy to the secret griefs of wild, unknown men,” and making “riotous excursions with privileged glimpses into the human heart” against his will. In fact, he admits that “most of the confidences were unsought.” He even acknowledges when introducing Gatsby that “represented everything” for which Nick had “an unaffected scorn.” Thus, his moral values and prejudices are evident at the outset of the novel.
While he may be more open-minded than other characters in the novel (Tom, Daisy, and Jordan jump to mind), he isn't completely straightforward or honest (although he "suspects himself of one cardinal virtue"-honesty). See, for example, his first impressions of Meyer Wolfsheim, The Wilsons, and party-goers at Gatsby's. Each of these reveals some bias on his part.
Indeed, by the end of the novel he has judged each character for one misdeed or another. His final verdict of Tom, Daisy, and Jordan is that they "“smashed up things and creatures and then retreated back into their money or their vast carelessness, or whatever it was that kept them together, and let other people clean up the mess they had made.” While this is a valid observation, the negative connotation of "smashed", "carelessness", and "mess" reflect Nick's view of events.
Your question gets to the heart of the novel and the development of Fitzgerald's theme. The answer lies in the structure of the novel and its use of flashback. When the novel begins, Nick has returned from living in the East. He speaks to us as a man who has been through a profound experience and is still dealing with it.
He begins by telling us of his family background and how he grew up. He explains that as a result of his father's influence, he is "inclined to reserve all judgements [sic]." Then Nick moves on to this statement:
And, after boasting this way of my tolerance, I come to the admission that it has a limit. Conduct may be founded on the hard rock or the wet marshes but after a certain point I don't care what it's founded on.
This is an important passage, for it shows that despite his tolerant nature, Nick does not accept all behavior; at some point, he expects people to base their conduct on some kind of moral code. When he says "I don't care what it's founded on," the implied conclusion of that sentence is "so long as it is founded on something." Nick continues, saying that when he came home from the East, "I wanted the world to be in uniform and at a sort of moral attention forever."
Before Nick left home, he was basically nonjudgmental; by the time he returned, he had made strong judgments about the kind of human behavior he had witnessed there. Nick admires Gatsby for his naive romanticism and his absolute integrity in pursuing his dreams. He detests the Buchanans, judging them to be careless and irresponsible in their wealth and privilege, and amoral in their treatment of other people. According to Nick, the Buchanans were the "foul dust" that "floated in the wake of [Gatsby's] dreams." Nick's moral judgments are those of Fitzgerald. Through Nick, Fitzgerald condemned the social stratum in American society represented by Tom and Daisy.
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