Factionless Cyrodiil would be the worst thing to do. If they did anything like this allowing certain people to mercenary to another faction would be better. It would help with the uneven populations around the game.
Well, as other MMOs have done... you can simply impliment a toggle check box. One that says "open world pvp on". And with it checked, you could be attacked or attack others in open world. With it not checked, you couldn't. And have it e unchecked by default. That would solve all of the pve griefing concerns etc. I loved that in Rift when I played, back before Rift sucked. Open World pvp was a blast.