The faction divide is such an utterly core attribute of the franchise DNA that it would be bizarre and an admission of incredible, incredible incompetence for them to have to scrap that.
If the faction imbalance gets worse… and worse… and worse… they’ll start resorting to stronger measures. The only exception they’ve made was with unrated PvP (mercenary mode), because participation in that content REQUIRES more of a balance, since the factions queue against each other. Even then, that’s such a minor area, with an exceptional situation (queue times based on numbers queuing against each other), and a more general notion of “Horde can contact and group with Alliance to take on raids and dungeons” would utterly break the basic mold of the faction divide.
It is of course true that the faction balance is bad, and people feel compelled to switch to Horde. I’m surprised how little acknowledgment there is that while there’s always been a slight trend to Horde, the years since MoP ended significantly aggravated the situation and forced many players, who otherwise would not have been willing to switch, to feel compelled to switch. Sure, you hear about Mythic+ being imbalanced right now, but the high-end goals and performance of this game has always principally been driven by raiding.
And what happened to raiding at the end of MoP? Blizzard changed it so that the highest difficulty, with the highest rewards, would require 20 people. While using flexible size for the other modes, Blizzard was not willing to do that for Mythic difficulty. And that 20-man size has had a massive impact on player migration ever since.
Maintaining a roster capable of fielding 20 mythic-capable players is not easy, and less and less easy the smaller your recruitment pool is. You might think it’s just “twice as hard” as maintaining a 10-man roster, but after experiencing both the before and after years, I’d say it’s more exponential than that. I would see guilds where a 10-man roster could often last without any real need for “management” or any drive for recruitment for one year, two years, sometimes even longer. A 20-man roster requires almost constant management and recruitment efforts.
Alliance guilds were in a harder position than Horde guilds on most servers. Guilds that beat heroic, but fell below the 20-man size couldn’t even raid mythic. Many guilds might have 15-18 people, and have to PUG the last couple slots. Oh… except of course, mythic was server locked (and still is even today until the Hall of Fames get filled, which takes months), so they’d have to find PUGs specifically on their server. That tiny pool often meant cutting standards and taking people not quite up to task.
This also plays out for any Horde guild on a dying server. Alliance have it bad more places than Horde have it bad, but Horde on any medium or low pop realm, and even some realms deceptively classified as “high pop” (but with low raiding populations) are often put in the position of needing to transfer to the mega-pop servers.
You want to talk about a trickle-down effect - the 20-man fixed size for mythic raiding has probably the biggest trickle-down effect in the game. The highest end players flock to where they can be sure they’ll hit that magic number. Their somewhat less hardcore friends follow suit, because the most active players tend to draw the slightly less active players to them.
Even people who don’t have ambitions of clearing mythic raids prefer to be in active guilds where high end content will at least be an option if they do someday want to make that into a goal. A raiding guild that could clear heroic with flexible size, but can’t get the numbers needed for mythic size, is doomed to less and less activity typically. There’s some exceptions, but they are just that - exceptions.
How do you get people to go back to the Alliance? It would take many rewards, but the OP is right, no achievement or storyline or allied race or racial will fix the problem. But part of the reasons those incentives don’t work is because even if people WANTED to make use of those, the numerical barrier to participation in the highest PvE content with the highest rewards is prohibitive and makes jumping to the Alliance look foolish.
If Blizzard wants to treat the problem, the first thing they need to do is treat the thing that’s causing the most bleeding. Stop the bleeding before anything else, because anything else without that will be totally insufficient. And if Blizzard wants to stop the bleeding, they need to address the elephant in the room - The fixed 20-man size for mythic. It’s the single biggest driving force in high end raiding guild collapses, faction transfers, and realm transfers. And that fixed 20-man size, unlike the faction divide, is NOT intrinsic to the DNA of the franchise.
. I’m sure you have lots of mounts and fuzzy pets. Obviously you don’t care about M+ or raids.