Or make clans matter. I mean.. fe community is rather small. People want to choose who to play with. With factions you'll always have the issue that people don't care about your fellow faction members or just don't care about factions at all. Factions could be for your personal story/rp. (don't get me wrong I'd love it to be as it was, but people their mind set has been changed. Maybe better to adapt)
I don't think there should be changed much PvP wise. If healing outside your faction is forbidden you can't team up and even in the faction lores there are allied factions. The faction based equipment and weapons would be cool. Not sure if anyone mentioned already.. But a punishment and reward system might be useful. Like killing your own faction will reduce your faction points and gives you some type of status for a while. Which will prevent you from entering keeps or recieving buffs from keeps controlled. Improve the buffs from the PvP zones. So it becomes worthwhile going there. Maybe some faction ranks which are only obtainable by challenging each other/voting depending your faction? Like chota would totally fight over leadership. Another idea.. A citadel look-a-like area in a PvP zone (the area itself would be a non-fight zone) but owned by a faction. It could give some nice buffs and some high tier crafting materials. Also you can build it up yourself. Like the faction who holds the most keeps/flags over an x amount of hours will obtain the zone.