If I'm going to condense the factions into four, I'd go to the root and base them on the Tezla avatars (AE, DC, EF), with everone else that doesn't belong into a catch-all Unaligned mercenary faction ala order of the ninth circle. We could then duplicate the subfaction abilities with ACs.

To elaborate (since I timed out :p) that'll be:

The Empire of Tezla: Atlantis through and through, tyrants and all that. Since they're the richest (they ARE the empire, after all), they'll probably have an easier time hiring (deploying in the army) Unaligned figures. Conversely, they could be penalized with using ACs. After all, once you're in the army of the Empire, you're in the army 1000% percent, previous loyalties be dammed. This may not sound fair, but the Empire being the entire civilized world IS canon, and this could be emphasized more.

The Death Crusade: Mainly Dark Crusaders and the Apocalypse cult. They not only see dead people, they most likely make out with corpses--not much of a difference, really. Since they all want everyone else either dead or undead, their faction would be totally revolting to the living--except to goths, maybe. Their faction ability would naturally involved raising the dead (Necromancy and Revenant, natch), and (ironically) healing.

The Defenders of the Land: The Elemental Council is restored when the Elven Freehold settled their differences with the Elven Lords. They claim to bring peace and order, which is a good thing, but their agenda of racial purity and a return to simplicity may not be what everyone wants. They'd get an innate affinity with nature, and their faction ability should reflect that, maybe with terrain bonuses.

and finally, The Unaligned: Everyone else ends up here. BPR, Orcs, Dracs, Magespawns, the works. Mpst likely being herded around like pawns by the Solonavi, in direct competition with the Shyft. In the spirit of anarchy, not everyone follows the party line, and their faction ability would perhaps be that they can work in other factions, but ACs are more effective if the army is compsed mainly of Unaligned units.

And so on. What do you think?

I think you would do better with 5 "houses" maybe something like this

Apocalypse:
Lead: Apoc (duh)
Shyft
MS

^ shyft and MS MUST be in the same house and curently I think the Apoc are useing the shyft and MS

Elves:
Lead: EL
EF

the reason the EL is in the lead is at the moment the EF forces are small because they have been beaten out of most of there territories. And I just dont see the EL being "lead" by anyone.

Humans:
Lead: AE
BPR

we will just assume Marz is the emp and peace is made.

solonavi:
Lead: Solonavi
DC

Orks:
Lead: Orc Khans

ok so where are the dracs ??? I would imagine thery would go to any of the NON APOC factions evenly as the dracs are all about self improvment right?

the solos would most likely have agents in the other NON APOC houses but not openly so I didnt devide them up.

The DC are with the Solonavi because the NON dark elves are beating them pretty good last I checked, and since they all want power I would imagine they ask the solonavi for it.

as for the Orcs, well I dont see them joining any house for to long if at all, they will always be raiding and pilliging the other groups. If you really want to put them somewhere I guess the solonavi house would be the most logical place.

The 1.0 factions would go with there 2.0 counterparts of course.

Here's how I see it:

Faction 1 - Orc Raiders

Faction 2 - Broken Tusk

Faction 3 - Shadow Khans

Faction 4 - everything else