With the specific exception of PVP content, both factions always fight the same enemies be it in the main game, dungeons or raids, for mostly the same reason, the same rewards and the same outcome. When was the last time there was something faction specific that had some impact in game? Wasn't it the opening up of some raid in Vanilla or BC where each faction had to donate a shit ton of stuff and so the faction that did it first got a head start? Hell, even that was just a matter of getting in on a raid a few days ahead. So again, at this point in the cycle, what exactly is the purpose of hard coding factions? At least let people do betrayal quests to switch as you could in EQ2, if not just let whoever form guilds and raid with whatever race you want.
You wouldn't really even need to do much with regards to PVP, at least not in Battlegrounds. In stead of waiting to have 10 of each faction (or 20 or whatever) to start a BG, just wait til you have a total of 20 and then randomly distribute them into two teams.
Again, some may be pissed off and want to keep the facitons, but I I say again, apart from minor aesthetic appeal and some very minor differences in racials that have by now been so diluted as to be all but meaningless anyway, what actual in-game differences are there?