Pretty much every other MMO has that stupid two factions system, I am not a fan at all. Right now pvp is broken perfectly. It does everything it should: help you blow off steam, waste time messing around and grief others by making them dance for several minutes.
I've always felt like the Challenges were added to appease the pvp folk. The PvP people I know are the sort that love leader boards and want to know where they rank. Well challenges have that. The only other way I could see most people getting behind something pvp would be a challenge where two teams work on opposing objectives or race to be the first to complete objectives.
I could imagine kobold mining missions where two teams race to mine the most crystals. Maybe create a weapon, call it jar of honey or something, and have player be able to throw them at the enemy team's kobold miners. Then have that slow or causes those kobolds to attract more monsters. Something like that I could see as fun and balance within the rest of the game.
I don't want playable ogres, hobgoblins, giants or beholders and we certainly don't want more trolls.