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What Changes, What Doesn't
With Blizzard's new faction change service, a trifling $30 fee will transform your high-level character in one of the races of the opposite side, saving you from having to go through the 1-80 grind all over again. You can now experience Azeroth as you never have before and see if your assumptions still hold true. A server transfer is not included, although you can jump ship for greener realm pastures for an additional $25.
You will of course need to pick a new race. The most important consideration is that you cannot change your class, so if you are currently a Draenei Priest, you won't be able to choose the Orc. If you're an Orc Warlock, your opposing faction choices are limited to Gnome, Dwarf, Worgen or Human. When you log in to your character, you will be able to customize him as you wish, selecting the gender, hairstyle, face, and other options of your choosing.
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Reputation and Achievements
Naturally, there will need to be some translation of the various things that your character has accumulated over her life, and reputations are the trickiest of these. While your home faction will be switched to the one which correlates to your new race, all other reps of the Alliance or Horde will change according to the following chart:
Darnassus - Undercity
Exodar - Silvermoon City
Gnomeregan Exiles - Thunder Bluff
Ironforge - Darkspear Trolls
Stormwind - Orgrimmar
Your faction-specific achievements will be easier to switch around, although there is one very important caveat here. From Blizzard's FAQ,
"With this, completed quests that are considered faction-specific—or are faction-neutral and part of a quest chain—will be removed from the list of completed quests and no longer count towards any running 'quests completed' totals."
What that means, for completionists and those currently working on a quest-related achievement, is that it's better to wait until you've attained your goal or be ready to start all over again. If your character is 2900/3000 toward reaching "The Seeker," understand that the completed number will drop substantially following the transfer.
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Mounts and Pets
While the number of attained mounts does not change, the types certainly will. Be sure you can handle the thought of your beautiful wolves turning into ordinary horses, or your majestic rams becoming bouncy raptors. Faction specific non-combat pets, however, will experience no changes whatsoever. So if you've always wanted that Sprite Darter, but can't abide the thought of grinding for it, turning yourself into a Night Elf may just provide the solution you've been looking for.
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The Argent What?
One of the most important considerations for players who are considering a faction change while leveling through the Wrath of the Lich King expansion is the progress made with Argent Tournament. To put it bluntly, all progress will be lost. You will lose accumulated repution, achievements and titles, which puts you back to square one on this long and arduous grind. Is it worth it? For most people, probably. After all, repping up with the Silver Covenant or Sunreavers is pretty fun, and its not like you won't soon have all of the Cataclysm content spread out before you.
Check out this series of guides on everything related to World of Warcraft factions.