So, let's cut to the chase: two factions at war don't work for pvp. They just don't. There's little to no reason to change sides, it costs money to do it or forces you to reroll, and creates huge server issues with long term issues that can eventually kill it. This isn't just my FFA nature screaming in rage (because lord knows those other guys almost always deserved it). WoW and Rift have seen it quite a bit- one side's uneven, the other ends up the bitch, and the only thing that may save the other side is if the stronger side gets bored and leaves the game, even for a bit. That's a best case scenario. Don't player deserve more?
I know the game died, but I still feel Asheron's Call 2's pvp idea was the best for factions. Let's leave out the fact that the most important pvp spots to fight for were FFA zones (I still believe that was a great call since FFA allows players to police themselves). I know Blizzard likes their silhouetting (making character models the basis of identifying another player's side and moveset), but people in Rift could deal with it despite some very similar character models and super flexible skill sets that made figuring out your opponent take a little time. People aren't dumb. As long as combat lasts more than 5 seconds and death means nothing (which is the point of theme park pvp, isn't it?), we can figure stuff out.
The lack of silhouetting as a core feature allowed AC2's players to join one of three factions or remain neutral (which, like Star Wars Galaxies, allowed you to pvp but didn't give you any rewards). If one side got too powerful, the other 2 could join up to take down a common enemy. Once that happened, one of the two sides would eventually try to stab the other in the back, and then the other 2 sides would join up and take that side down.
As well, players would change factions. Yes, some would change to the winning side, but we all know those are usually the bad players. In order to escape certain stigmatisms ("Faction A's full of baddies, all the hardcores are Faction C"), good players change sides. This makes it so that there's several factors that can help alleviate faction imbalance.
With that in mind... really, why are we still doing 2 sides? I know the Star Wars movies usually have 2 sides going at each other, but bounty hunters, smugglers, and spies are abound, yet we once again will have another Star Wars game with 2 sides. TOR had a great opportunity to have a third side in it for the profit, Jedi becoming sith, dark jedis coming back to the light side, etc. Instead, the 2 sides are being thrown at us once again, and without any practical way for us players to change things up to help balance things out. Guess we'll have to wait and see how Arche Age's 2 warring factions + hostile third side works out.