Frogboy, I warn you that you're getting our hopes up, especially for vets who dream that the FE factions will someday act in varied, clever ways like the GalCiv2 factions did. So much of the challenge and enjoyment comes from how the AI uses the resources it's given. Squandering them = endgame letdown, whereas using clever tactics = endgame hustle/reaction strategy.
For example, I think Tarth ought to use lots of guerrilla tactics (which matches their backstory and racial trait concerning army size). When going to war, they could be quicker to react with smaller units in a spread (sending hit squads after outposts, harassing caravans, pioneers, or single units in transit). They would best understand that a great defense is quick strikes/infiltration that make the enemy play defense (or lose valuable resources, and even poorly defended backfield cities--why not have units skip over front-line cities to target a soft backfield using their superior ability to move over tough terrain?). To combat the whole steamrolling that players often do, rather than have them beat their heads against a superior force, have them circle around behind to recover outposts and cities as soon as the larger army has moved on.
Behavior like this forces the player to make careful tactical choices, and this...this is at the heart of great gameplay, ala GalCiv2. I remember carefully choosing/developing colonies and handling diplomacy, because it all mattered, not because it was simply a function of the game. If you can create this level of challenge in the more complex environment of FE, the world (at least our small corner of it) will laud you.
I think the best path to take is to assume what I do for 1.7 will break the game, make it suck and cause cancer to your pets. That way, if it merely catches your computer on fire, you came out ahead.
1.7 won't do what you're looking to do with the factions. I'd have to do a full on major update (probably around 40 engineering hours) to do that. For 1.7, I have 16 hours total.
The DLC is what pays for all this. Each time we release a DLC, a certain % of the income goes into doing updates.
The last DLC did so well that it justified me getting 16 hours on this (which is a lot of time for me to get to spend on something specifically these days).
Now, *my* tastes in DLC are very different from other people's tastes but I plan to do the next DLC myself to cater to people like me (basically a tactical map pack with new tactical spells to go with it). I don't really care about sovereign leaders or new factions but I understand that I'm in the minority on that (especially given that the dead world and the leader pack are the best selling DLC).