Yeah, it worked for Tera too. Tera had 3 factons even those that wern't in a guild could join (Free Traders, Iron Order, and Enlightened Union). That's really sad I still remember them, lol. They had an alliance conflict every sunday at 8est (which would be an instanced battle between the three factions and the higher ranked people in each faction. If you weren't ranked, you didn't go.) Other than that they had three faction areas that you'd do things in, there were times it was safe (PvP was disabled) other times not (PvP enabled). 

I wish this game would do that on a global scale. With open world though. No instances. Or limited to one are of the map. Have different factions but have a week cooldown if you join/leave a faction so you don't jump back and forth. You'd also be penalized for that time. You'd lose your rank and start over. You could get tokens or whatever from killing people in the opposing factions that you can trade for various things. Killing enemy players along with doing quests with your faction would increase your rank. Which would grant you and your guild better rewards. Any guild would be able to join any faction regardless of size and rank. It would be all about participation. 

For people who don't like PvP (don't join a faction). Simple. You'd only be able to gank enemy factions. No flagging system.

Unreal dream with Pearl Abyss... ^^