I just want to say this concept is pretty much perfect and I see a lot of complaining responses so I'm going to counter argue them.
1. "Too many elves" - Guys, nagas having elf form is like worgen having human form. You will literally only see the elves when on mounts or if they press the change form racial. I know some people would prefer they just curl their snake tails into the saddle of a mount but can you imagine how ridiculous that would look on some mounts like Gryphons.
2. "Elf form looks too similar to highbourne" - they are supposed to be. I think the version that looks the most elvish is actually the best one because it fits the lore explanation. It's a gift from elune, showing her compassion for these reformed naga. Additionally, it's this elven form that would probably enable people like tyrande to see them as people, not monsters . If they still looked like monsters, it wouldn't be much of a gift would it? Additionally, they aren't being cured of their naga curse, it's just an act of kindness to be able to partially have part of the person they once were back for temporary amounts of time. Not only so they can feel a bit better about themselves, but also so they can be accepted by others.
3. "Naga with legs would be better" - personally I think naga with legs would look ridiculous. However, personal beliefs aside, a naga with legs kind of defeats the purpose and desire for the race. Their most distinctive feature is their snake like body.
4. "Colour scheme is bad and looks to much like other elves" - guys, please use some inginuity. Obviously this could just be ONE skin colour option for the naga. U could have green, blue, green and blue, blue and green, blue and purple and so on. And yes, this would make your elf form green and so fourth as well.
The Only thing I would change about this concept is the alliance only part. I would make them neutral. Perhaps in the starting zone, the nazdorei rebellion find ship wrecked alliance AND horde and they all have to join together just to survive the oncoming naga forces and at the end when the rescue teams come looking for the sailors, they agree to bring the nazdorei with them back to their respective capital cities to be judged by their leaders on whether they can join the factions or not. However the rescue team captains make it clear you must pick a side, "them or us". Half of the naga npcs would think horde are the best fit, and half would think alliance are the best fit, similar to the pandaren huojin and tuishi. Once you pick, you sail off with them and then your scene with Tyrande and Maiev plays out (for alliance) and a similar scene could play out for horde with lor'themar and Thalyssra.
The other thing is I don't really think these are allied race material. I think they are new race material. They can add to that very small neutral banner.