Hey Dahlgren, the Badges have to do with the merc supply quest. I haven't done it yet myself, but....
I went into one of the little rooms in Whitegate and received a CS and key item "supplies" for the quest that I am to deliever somewhere to show my worth to become a merc. Then, as I was leaving, I talked with a Galka inside the same room that was near the door as i was exiting.
The Galka mentioned the 4 badges, and said once I got them all to give them to the person from the above paragraph because she likes them. He also said not not let her know that he told me so.
Don't know all the details, but they are needed or used. Wasn't just to have us running around like idiots killin time until the expansion showed up. LOL