Wow... Just wow. I really like this idea for a number of reasons
#1 I'v never heard of anything like this on such a scale before and I think it would be awsome to try it, plus it would certenly give Minecrack an edge when it comes to attracting new players.
#2 I think this would decrease the griefing to some extent because the griefers will get satisfaction from destroying the other fractions bulwarks.
#3 This would certenly promote a more deffensive building style (traps) wich in turn would create a need for players to think more about how to aproatch their target and awoid said stuktures rather then just gear up, sneak up to a target and kill him/her before they can react.
#4 As the major fantasy nerd (and former WoW player) I am, I love the though of two separate fractions battling eachother to the bitter end of the world.
However I think that for this to work properly we need a neutral ground (like the current spawn, or Dalaran/shattrath in WoW) where players can go to trade, talk and/or just hang out with everyone. I do not know how much this will be used but I know that sooner or later ppl will want to just relax in a safe place.
I love this idea and I'd love to see some more brainstorms about this, if the moe veteran players can get together and discuss this I think we can come up with something really awsome.