The previous posts are right in saying that Nick does not remain impartial - and probably doesn't really even start out being impartial. His efforts toward this end are certainly not successful.
But, I'd ask the question - Was Nick able to become as close as he did to Gatsby at least in part as a result of his attempts not to judge?
We might be able to say that Nick's attempts not to judge are like an attempt not to "see" the world around him for what it is. By accepting Gatsby at face value, albeit only momentarily, Nick gains Gatsby's trust and intimacy.
As much as Nick does eventually cast judgement on everyone, he also acts as a friend to Daisy, Jordan and Gatsby regardless of his viewpoint and his presentation of these characters in the narrative.
I agree that because Nick is serving as narrator, it takes readers longer to come to the inevitable conclusion--that Gatsby has the purest heart of any of the other characters. He clearly does disapprove of characters along the way, but never in a way that effects a change. He does nothing to dissuade them from their bad behavior, he does not try to help others see the finer qualities he sees in Jay, and he does not try to warn Jay about the deception and corruption of those around him. He may be a reliable narrator, but he is certainly not a reliable friend.
Post #3 raises some very cogent points. Nick is, indeed, not just an innocent bystander, nor is he always nonjudgmental; in fact, he is, at times, an unreliable narrator. because he merely postpones the conclusions that one must draw. When he gets drunk at the New York apartment, Nick does avoid judgments upon Myrtle and Tom Buchanan, but he simply postpones his terrible disillusionment with the moral corruption of the East Egg that dissolves into the Valley of Ashes.
The materialism of the East also contributes to the tragedy of Jay Gatsby and the destruction of values. Only at the last does Nick realize that in his honest dream, Jay has been better than "the whole d--bunch put together." Nick Carraway passes judgment here in Chapter Eight. And, in the final chapter, before he departs, Nick goes over to Gatsby's yard and looks "at that huge incoherent failure of a house" once more.
Nick's ability to reserve judgment kept him in the know of whatever was happening. Tom had total trust in Nick when he introduced him to his mistress Myrtle. Tom never suspected that Nick would tell Daisy what he knew about Tom's affair with Myrtle. Likewise, Daisy never suspected that Nick would share with Tom his knowledge of Daisy's and Gatsby's affair.
Nick knew what everyone was doing behind the other's back, but he never shared his secret knowledge. This characteristic kept Nick at the heart and center of the action of the book. Everyone trusted Nick to keep silent about hush-hush affairs. And Nick did just that. He never shared any of his knowledge with anyone:
In keeping with Nick's code of conduct, inherited from his father, we learn from the very beginning of the novel that he is 'inclined to reserve all judgments' about people because whenever he feels compelled to criticize someone he remembers 'that all the people in this world haven't had the advantages that you've had.' His father also told him, prophetically, that 'a sense of the fundamental decencies is parcelled out unequally at birth.'
Nick was able to narrate an impartial story. He did not seem to take sides with Daisy or Gatsby. He was a fairly objective onlooker. He just absorbed the details of the others' personal lives. He kept his own life free from entanglement. He was an innocent bystander. By reserving judgment about the other characters, the reader can form his or her own opinion of what is really happening in the story. Nick is the good guy. He relates a tragic story without judging.
Was Nick really just an innocent bystander? He stood silently by while his cousin's husband cheated on her but having that information gave him justification to set up secret love trysts between Daisy and Gatsby. He kept quiet on both sides of both affairs, but when he first learned about Tom's affair with Myrtle he thought Daisy should "rush out of the house, child in arms. Keeping Daisy's secret affair with Gatsby was only fair, until in the end Daisy and Tom's carelessness got Myrtle and Gatsby killed. Nick ended up judging everyone. This story is an American tragedy told from the point of view of someone standing on the inside watching as things go on around him but doing nothing to change things.