Designing a game around factions from the ground-up looks to be the only way to really approach balance in a player v. player environment. I really liked the game that has 3 factions, each has the same kind of classes, but varied.
For example imagine that the spellsinger the virtuoso and the warchanter were classes instead and each belonged to one of the three factions.
Each faction has questing areas strictly PvE and an area to fight other factions...with goals...a giant, 3 team, capture the flag where you can use siege engines and all kinds of stuff and each faction has the same power dynamic.
Though I'd be a little tempted to try a PvP PD server that included friendly and self-fire, fireballs had lethal consequences to the caster on paper...but probably not more than once or twice.