The Kaldorei and the Forsaken shouldn't be going anywhere in the factions. That was never an issue.
If it means making half of your playerbase do questionable stuff and make them feel bad yeah, lets not repeat that.Indeed, the faction conflict should have ended with WC3, with minor issues like Jaina dealing with her family's judgment. The repeat return to "Orcs vs Humans, raaaaah!" has hurt WoW time and time again.
Yeah no, it would not of been better. The Night Elves align far more with the Alliance then the Horde. And easier? Wat? This feels so forced and stupid.
I'll always say, if they had kept the warcraft 3 factions (Alliance/Humans, Horde, Kaldorei, Forsaken and either make the Blood Elves part of Alliance or add Illidari) into WoW, the story would have been far easier and better. The gameplay would have required cross faction play from day one though.