That's assuming each faction has to be full blown like the Federation. Giving how some factions are allies, it could be a sub-faction within the Federation that shares the Federation resouces (ESD, Spacedocks, etc). The Cardassians for example could have ships assigned to work along with the federation and choosing to play on their faction gives you their perspective but otherwise still uses the main Federation storyline.
Idealy I would love to see these develop into full blown factions in the end, but giving the state of the KDF, I don't see this happening. The ball has been in Cryptic's court for 2 years and they dropped it.
Indeed. WoW did this from day one. Even if your character was with the Horde, say, you had a different starting zone and different starting quests for your particular species, be it Orc, Undead or whatever. This way you have 8 (now ?10) completely different sets of looks, emotes, innate abilities, home cities etc etc.