Storyline aside, what I'm talking about is banishing the current 2-faction division. What is it for anyway?
Lore? Nothing stops Orcs and Humans continuing their war and involving whole bunch of other races in it, whether players are split into two factions or not. In fact, breaking the factions opens a whole lot of new storylines. Primarily involving Forsaken losing all of their 'friends'. Regarding that, I predict a sacking/destruction of Undercity in response/revenge of what's happening in Theramore, sending the surviving Forsaken to set up a new capital further east, say, Andorhal.
PvP? Breaking the two factions each into their own races wouldn't kill PvP. If anything, it would increase it since now you'd be allowed to attack everyone except your own race. In other words, when earlier 50% of players you met were enemies able to attack you, now it'd be over 90%. So again, removing the faction split would only improve the game. Battlegrounds? Simple, if it's orcs vs dwarves like AV, you join which ever side you want to gain reputation with. Unless you're orc/dwarf, then you're stuck with your faction. Naturally, gaining reputation with one faction would reduce it from another, so there's no way you can be friends with both sides. After all, there are multiple wars going on. I can already foresee new battlegrounds where you'd instead have Blood Elves vs Forsaken. Or Worgens vs Humans.
Trade/Chat limits? One main reason for not allowing players talk cross-faction was the verbal abuse after you got killed. Then, years ago, Blizzard allowed creating characters on both sides even on PvP servers, effectively allowing all that verbal abuse to happen. Trade limits? We all know that all the faction balance does to that is huge harm. Been to a server with 95-5 population balance? The economy is complete mess for the smaller faction. Merging auction houses would be huge help.
Removing the faction split would also almost completely remove the issues of so many serves having massive faction imbalance that ruins both PvP and PvE. Allowing you to form raid groups among any races would actually improve the life of everyone. Is it a lore issue if a raid group of humans and dwarves etc is suddenly joined by a lonely orc player? Is it a blasphemy? Then what the heck is Thrall doing there, and nobody's complaining about it. Is Thrall allowed to be friends with both sides but nobody else? Why is he allowed to be friends with Jaina when any other orc going near her will get killed on sight? Is Thrall a traitor to the orc race for being friendly with the enemies? And again, if Thrall is allowed to pick his own friends regardless of race, why are all the players forced to be racist? Yeah, I just used the racist card.
Pandas. Mists of Pandaria is using desperate lore tricks to actually split a group of pandas (all the players) into two factions, after which they magically just forget how to talk to each other. Seriously?! Get rid of Horde and Alliance and pandas can be their own race just like everyone else, they can participate in lore-led wars just like everyone else, and panda players could pick their friends just like everyone else.
I haven't even mentioned the most obvious benefit: real people with real friends. Just recently we were finally allowed to raid together with our friends even if they're on different server. Except if they happen to be playing wrong race. Real people with real friends would like to play together with them. Real people with real friends aren't racist.
So, here's a challenge to all the readers, blue and what color you might have: free your mind and think how the game could evolve without the faction limitation. Would it improve? I'm 100% sure it would, but that's just my view. Would it turn into CarebearCraft? I don't see how, when everyone would be an enemy, and you wouldn't even be able to visit each others' capital cities anymore. Sure, you and your selected friends would gather for a raid from all races alike, but after raid you might meet each other on a battleground on opposing sides. I got some guild mates I wouldn't mind meeting at the Lumber mill...