The Faction Lock system will certainly create problems for many people. I think that splitting the population into 2 Factions (like tradition MMOs) is kinda of ok, but when go over that, to three of more Factions, it creates problems. Especially in ESO that people want to play specific races. I personally have friends who would only play Khajit and others who want to play Nords. In any case, I think there is a simple solution to this problem, that is both easy to implement and consistent with lore without removing the Faction Lock itself.
DIPLOMATIC PASS FEATURE:
1) Any player can invite a person from an Opposing Faction to a group. – This would be an 10 second castable out-of-combat ability (this way you cant just call reinforcements when you need them)
2) At the end of the cast, the Invited Person would be teleported to the location of the person who invited him/her.
3) The Invited Person would get a Diplomatic Pass Debuff while in group.
4) People with the Diplomatic Pass Debuff would not be able to interact with NPCs or start new quests except for selling and buying basic supplies. To make it more realistic, you can add NPC dialog for people with the Diplomatic Pass Debuff (i.e. “Your kind is not welcome here” or “Go away outsider”).
5) While having the Diplomatic Pass Debuff you would be able to complete the quests available to your group (i.e. the people who invited you) – The quests you do under the Diplomatic Pass Debuff WOULD NOT AFFECT 50+ or 50++ content in any way, you would still be able to do these quests again at 50+ and 50++.
6) When you leave (or are removed) from group, you are instantly teleported back to your alliance and the Diplomatic Pass Debuff is removed.
7) You would also be able to invite someone from another Faction when in a Raid Instance.
8) The Diplomatic Pass Feature would not work in Cyrodiil. But if you want to, its certainly workable. For example it could make you change Factions while the Debuff was active (so if you are a Nord with a group of Altmer the other Nords would want to kill you - which is very realistic). – You would not get Alliance points while PvPing with the Diplomatic Pass Debuff.
I think this feature is easy to implement (it should require some but not a ton of new programming), realistic and consistent with lore. I don’t see why anyone would have a problem with it and I see no serious reason why ZOS should not implement something similar. It fixes the downsides of the Faction Locks system without creating any serious problems.