I'd like to see factions that aren't determined by race but instead based on the choices of the players. Choices like where they hunt, what quests they do, which paths they take on multiple path quests, treatment of other players and personal tendencies; all this plus the choice to not join any factions and not PK by remaining neutral. However choosing to be neutral would come with consequences. No one will hate you enough to kill you, but no one will like you enough to give you good prices or special quests. Neutral players would also have to avoid killing things that are faction aligned if they wished to stay neutral.
Basically this kind of system would give the player more emotional attachment to their faction than if they'd just chosen one at the beginning or shoehorned in according to what species their character was.