The mix of gameplay and lore would make alliance blood elves horrifying. Lore-wise blood elf population has been ravaged and is probably the lowest of all Horde races. In-game, there are so many blood elves that they might need to start considering birth control. Lore says that orcs are the largest part of the Horde, but player created Blood elves are numbered more than the next two highest races COMBINED. If you give them to Alliance, the low population of Blood Elves will look as if they have a secret genetic relation to rabbits.

I think it'd make more sense to have a neutral faction - Tauren, Belf, Draenei, Goblin, Forsaken don't really fit into the Alliance/Horde and are more shoehorned into one of them since the game forces you to have one.

There are certain races that are core parts of the respective faction (Human and Orc are the prime examples) but the rest seem like they don't really care about the politics and would rather be left alone (or play off/profit from both sides).

I'd love to have a choice at level 10 of Alliance or Horde or Neither!