IMHO just create sub-factions within the Horde and Alliance factions, one is pro-war and the other is pro-peace.
If you join the pro-war one, nothing changes.
If you join the pro-peace one, you are treated as neutral and can come and go from the opposite faction’s cities as you please and can communicate with the other faction openly but cannot join any kind of PVP activity - you also can no longer “get flagged”.