It honestly would fix a lot of things, especially server imbalances.
The only things it really ruins is immersion, and regardless of whether you RP or you don't (I don't) seeing Orcs running around Stormwind or having Worgen frolicking around in Orgrimmar really does break immersion. How important that aspect is will be entirely up to each individual, but it would be a large change. On PvP servers there would be less risk and PvP in the world would effectively be dead forever unless they changed the rules up, which would likely cause more confusion.
As far as queues go, organized raiding or even forming groups goes, well it would make things a lot smoother lol.