I was personally excited to hear about Faction Change and Race Change services Blizzard announced to be implemented. Now that Faction Changes are available in the US and EU, I decided to lay down the basics.
First of all, these do not include a free server transfer and you can only change one character’s faction in one payment. Now that PvP realms allow you to have both Horde and Alliance on the same server, there are no server limitations. The only thing you are limited to is races, for hunters (see ‘Racials’), for example, you cannot switch from an Orc to a Gnome. This service comes with character customisation and an optional character name change. If you want to eventually change back to your original faction, you may choose a different race to the one you originally chose. Though bear in mind, Blizzard are working on race changes.
Faction specific items will be switched. You will not lose anything in the process. This includes, but is not limited to, gear, vanity pets, mounts, achievements, titles, reputation (a full list of faction counterparts can be found here). All quests and quest items will be reset, though restored if switched back to original faction. If, for example, you have completed every quest in Storm Peaks, you will keep the achievement, however, you will be able to redo the quests for money. Items which are not faction specific, i.e. Food and water, will be unaffected by the change.
Friends lists, ignore lists, guilds and arena teams, as expected, will be reset. You will be able to keep your earnt honour, arena points, marks, emblems, however pending arena points may be lost in the transaction. Bear in mind if you have any pending auctions or mail in your inbox that this will block the faction change. For a level 80 character, the gold limit is 20,000g, be sure to leave any additional on other characters or with friends if you’re feeling generous.
Another thing I have been lead to believe, as with a server transfer, any saved instances will be reset. If you cleared Ulduar on a Wednesday and faction changed on the Thursday, you should be able to clear it again before the end of the week. Though please don’t quote me on this.