A faction merger would require, at the very least, a cataclysm style revamp of just about every zone in the game. It would require changing how a lot of things work like battlegrounds and world pvp. It would just all around be far too much work to actually pull off in a way that wouldn't be a technical disaster, and if they DID get rid of the factions I think blizzard would have a huge backlash that it hasn't seen since it tried to put the real names of players on the forums instead of posting through characters. Sure, some people might enjoy it, but they would alienate a very large portion of their playerbase by doing away with faction identity.