So we have roughly 3 options (assuming we want to address faction imbalance):
- disable racials + maybe free transfer
- allow cross-faction arena
- incentivize playing on the underdog faction, by means such as faction-specific cutoff (in which case it will balance out eventually and be equally hard for both sides)
There are many other ways to incentivize changing faction, but even if they did find a way that worked perfectly, I think splitting the pvp community in 2 might not be the best option. Even in the grp finder on alliance it can take long time to find partners just for capping w/o concern for rating. So it really seems like the best option is to allow cross-faction arena (and also implement cross-faction grp finder for arena).
That being said, I really think faction-specific titles would work out after a little while.
All they need to do is allow cross faction arena queueing and both alliance and horde will be fixed. There's zero sense not to, anyway, because according to lore, arenas weren't dependant on a faction, and in the current game you're also able to kill people of your own faction inside arena, a feat not possible in other areas of the game.