Agree with most of ProfessorWalsh. Here are my additional suggestions/differences with his thoughts:
First, the other faction balancer in DAOC was the 3rd faction. If a server had a faction population imbalance, 2 of the factions would naturally and not via any game mechanism "team up" against the stronger realm until balance was restored. This also keeps every faction wary of the other faction even when they are "teaming up" which helps develop the pvp/fvf/rvr community.
How to create a 3rd faction in this game when it wasn't design in from the beginning? JFC, with all of the talent they assembled, I don't know why they didn't start with 3, but here is my 2 yen's worth...
1) Light/Dark/Grey: For both PvP and PvE servers, your Faction Life as it relates to Opvp/rvr/fvf should start at 50 and it only applies on Illum or whatever implemtnation of open pvp they go with. Each person's faction is determined by their light, dark or neutralness. A player reaching 50 will be assigned a faction based on this characteristic. A character can use daily quests to adjust their alignment but it will take multiple days to 'fix' them obviously. A player with mulitple characters of differing alignment will have a timeout period when switching to an alternate level 50.
2) SWTOR has Reps, Imps, and Mercs but they only implemented 2 factions. Make an expansion that moves all of the merc classes to a 3rd faction. I know this would be a huge upset for some people, so give the masses with guilds set and friends developed a one time choice for the toons that would be moved to the 3rd Merc realm. Obviously there would need to be some class rebalancing here and a few other storyline issues.
Obviously my 2 yen's worth is worth just about that and I don't have to implent any of it so easier said than done. I just really really hope that they get whatever new stuff done before people leave because SWTOR has a good base game to build from.