I say make the diplomacy more complex.

Each race is their own faction. Through player actions the like/dislike of each race for the other is changed.

For example.

Server starts with every faction neutral, if the Nord team/guilds do quests and deeds for the Argonians they slowly warm up to them. This opens up markets, towns to each other. If this continues they can become allies.


Conversely, another Nord Guild may not like the Argonians and would actively seek to worsen the relationship by raiding caravans, attacking gaurds.


A 'Nord Guild" wouldn't necessarily only have Nord's in it but that is where it's HQ is.

Interetsingly, if the Nord Guild annoys the Nords, they may find themselves exiled.

So the diplomacy would work not only on a personal level, but on a guild andfaction level. This would make things even more interesting as various NPC groups might lend support to Guilds that do favors for them. Of course, if individuals/guilds annoy a faction too much they may work to undermine them. An NPC group might even help to take a fortress but they would then man it for themselves.

In other words, make it more dynamic and changing, you aren't just worried about Faction A and B that are always the same, but are worried about ever changing chess pieces trying to manuever for control.

Thoughts?

Thats a good idea, but it would be for another game.
For what I will call "guid diplomacy" you would need an open world nearly free of constraint. A setting of total war where you need to fight Daedra as well as the other faction in hope of concerving your home and right is not the place. In this setting a nord group who absolutly hate argonan would probably tolerated them in their rank because they all fight for a greater good that is over mortal concern.