Back on topic ....
If you look at factions in Elder Scrolls, I agree they're laughably simplistic ego stroking and nothing more.
What I see is each street gang, poser gang, corp, law enforcement (private and public, immigration, what-have-you), religious group, Anonymous2077, The Daughters of the Confederacy, you name it is a faction sometimes with ties (good or bad) to others. Your actions ... and perhaps even lack of action ... will alter your reputation with that group thus with the others it interacts with. If you're in good with them they'll offer you jobs, perhaps better pay, special items, maybe even assistance. If your rep with them is bad ... no jobs or less pay, or you may not be permitted into their turf, and if it's REALLY bad they may attack you.
This sounds complex, but once you've determined the relationship each faction has to each other (which you have to anyway unless each is fully autonomous) it's no more then a single database entry with your total rating (positive or negative) with that faction that determines what jobs, pay, assist or oppose options come up. Allied or opposed factions would use some fraction of your rating with other factions they assist/oppose as input for what they offer you.
This alone would do wonders for replay-ability as you could not only play a different character with different skills (assuming it's not an FPS and character skills matter) but chose to ally with or oppose different factions which will dynamically alter what you can do in the game.