The world is meant to be broken down into many factions, although the factions would not necessarily be very rigidly controlled and organized, when the PC's run through adventures the enemies they defeat will have 'friends' who the world will spread to and pressure will be put upon them.
The first faction is the Valkrein Empire. This Empire is run by Sidhe who lord over all the PC races. The Sidhe are meant to be the "ultimate guardians of light and justice", a "holy" and "flawless" race whose "beneviolent" rule protects the "lesser" races. These statements are in quotations for while the Sidhe will indeed speak and often times make attempts to act in such a way, they will have codes of chivalry and call upon the power of the light, their methods and rule of law are often draconic and their conceit, ambivalance, naivity and self-centeredness knows no bounds.
Only the Sidhe are allowed to use magic (I know in the 4E system what 'counts' as magic can be kind of murky, but we'll say Arcane power source powers), are allowed to wield magic weapons or wear magical armor and garments and only Sidhe are allowed to be in possession of written knowledge covering not only magic, but even maps and histories of the world. Although these laws are not necessarily effectively and efficiently enforced as the countrysides are large and vast and the number of people under their command well out-number the Sidhe Knights, Barons, Lords, etc. and because certain Sidhe are willing to allow certain members of other races a good amount of leeway if it serves the empire, these laws are quickly brought up in order to find a reason to imprison or execute those who they feel may be troublemakers.
The Sidhe live for hundreds, maybe thousands of years, and generally have a lack of passion and romanticism. They can be chillingly cold and stick closely to their codes and creeds. Sidhe are above all other things honorable, even the most wicked Sidhe would never break his word lightly. The Valkrein Empire is made up of many, many smaller kingdoms ruled by Sidhe kings, queens, princes and princesses. Their relatives make up the lords, the barons, and the knighthood. Even the lowest ranked Sidhe are military officers, a rank almost never achieved by other races who tend to make up the conscripts and the enlisted.
The most common race in the Valkrein Empire are humans. The origin of humans is shrouded in a good deal of mystery, however there is little doubt that they have lived in the world far before the Sidhe. They may have been created by gods or by dragons, but a number of other races have been created from human stock over the millenia-- including the Dwarfs, the Ogres, the Orcs and nearly all of the divine-blooded. The reason for this is that humans are by far the most mutable and adaptable species. Humans fill all manner of roles in the many kingdoms of the Empire, but are primarily farmers, fishermen and carpenters as these roles make up the vast economic base of the empire.
Another common race is the Dwarfs. Originally humans who were somehow altered to be ideal miners and warriors, the Dwarfs are known as a fairly long-lived, but slow and ponderous race. They are quite wise and have a love for tales and fables. Dwarfs usually know quite a bit more about the history of the world than other races, no doubt because the Sidhe loathe to delve deep into the Dwarfs underground cities. Although not normally aggressively violent, the Dwarfs often find themselves embroiled in underground wars with forces such as the Goblins, Dark Elves, Undead and even the forces of the Stone Trolls. Countless Dwarfs have been slaughtered hidden far away from the eyes of the Valkrein Empire which has slowly forced the Dwarfs above-ground and alongside the humans and Orcs who they find are difficult to compete with in jobs besides mining, stone-carving and metal-working.
The third most common race in the Valkrein Empire are the City Orcs. Although not physiologically different from their barbaric Wild Orc cousins found out in the wilderness, the City Orcs are usually cleaner, healthier and more civilized simply because of their upbringing than those who hail from barbaric tribes. Orcs are large, powerful and noted for having very short tempers. They are not typically fairly dim-witted and find themselves most happy and suited in menial work or jobs as conscript soldiers or guards. The Orcs were created from humans who served the Trolls long ago and were warped with dark magics into monsterous soldiers. After this war many Orcs were captured and those who live in the Valkrein Empire are typically those who descended from the prisoners. However, every now and again a Wild Orc tribe is shattered and some of the survivors choose to become members of the Empire.
One of the more unusual races of the Empire are the Brownies. Unlike those created from humans, the Brownies are beings created from pure fey magic. They are created every now and again by Sidhe to be servants. The Sidhe can always create more and so when Brownies wander off or are left behind, little attempts to retrieve them are made and they invariably make themselves at home in the Empire. They are incredibly small beings, the size of young children, and are stereotypically quite jovial, happy and above all else helpful. Althoug this doesn't extend to every member of the Brownie race, there is enough truth in this perception that they are looked upon fondly and usually treated kindly and trusted without having to do too much to prove themselves. Brownies have the easiest time getting the ear of the Sidhe or convincing them to grant favors, so those of the Valkrein Empire who are brave enough to adventure often find it useful to have a Brownie along to smooth over the minor crimes they may committ during their adventures.
Another race found in the Valkrein Empire is the Elfs. The Elfs were probably Sidhe once, but they were free-spirited and rebelled against the ways of the rest of their race. For this act they were cursed-- they are no where near as powerful as their Sidhe cousins and generally their lifespan is no longer than that of a human. However, while an Elf may live for only 60-70 years, they do not age while they are asleep and they are able to enter trees and hibernate as long as they please. Thus there are Elfs who have only lived 30 years, but look to be barely 20 and were born 100 years ago. The Elfs are tied closely to the forest, they can sense the movement of animals and spirits within it and often know when danger is approaching while within. However, Elfs find being seperated from the forest disturbing, almost painful and are haunted by nightmares the longer they are away.
Many Elfs are often even more afraid of death than humans and are known to go to great extremes to avoid it. Elfs that know they are approaching death sometimes embrace secret arts of the forest which transform them into Nymphs and Dryads which become wrathful spirits of the forest and are known to attack and kill woodsmen and settlers with great frequency. Because of this a lot of Elfs find themselves split between whether their greater loyalty should be to the people of the Empire or to the spirit of the forest.
The last race commonly found within the Valkrein Empire is the Lutin. Cousins of the Goblin Princes, the Lutin were Goblins who joined the side of the Sidhe when the Sidhe overthrew the Troll Empire. Because of their service they were accepted as members of the Empire. However, the Lutin are naturally chaotic, mischievious, clever creatures with a generally twisted and black sense of humor. Although some try to be good citizens, the overwhelming majority are thiefs, vagabonds, gamblers and corrupt merchants. They have little love for their Sidhe overlords, but pay them just enough lip service in order to avoid being executed. However, for all their chaos and rebellion, Lutin are often quick to help those who are truly suffering or impart genuine advice to those who need it. Often the first help that starving farmers or victims of attacks or natural disasters get are goods and funds from Lutins, which were no doubt stolen from the coffers of the Sidhe Lords in the first place. Because of their reputation for helping the meek, but stealing from everyone else most members of the Empire, particularly Sidhe, are always wary and alert whenever one is involved.
So in summary, for character creation we have 6 PC races.
1) Humans - Direct from PHB 1
2) Dwarfs - Direct from PHB 1 except they get +2 Con and +2 Wisdom OR +2 Strength and their personality and appearance are slightly altered
3) Orcs - Direct from PHB 2's Half Orc except they get +2 Strength and +2 Dexterity OR +2 Charisma
4) Brownies - Like Halflings in PHB 1 except they get +2 Charisma and +2 Dexterity OR +2 Intelligence, they also gain the Fey Origin trait and obviously their personalities are quite different
5) Elfs - Like Elfs from PHB 1 except they get +2 Dexterity and +2 Wisdom OR +2 Charisma
6) Lutin - Ability Scores: +2 Intelligence and +2 Charisma OR +2 Consitution
Size: Medium (barely)
Speed 6 squares
Vision: Low-Light
Languages: Common, Goblinish
Skill Bonuses. They also get +2 Bluff and +2 Streetwise
Racial Abilities: ??? Haven't decided yet.
They also have the "fey origin" trait (Goblins are dark fey in this world)
Threats to the Empire
The Draconian Empire - Ruled by Dragons, lead by Draconians and contains Lizardfolk, Kuo-Toa, Troglodytes, and Kobolds. More info coming later
Goblins - Goblin Princes are "true goblins" who are a previous rival race to the Sidhe and they create numerous "common goblins" diretly out of evil fey energy harnessed from nightmares. They also transform human children into Bugbears. Nasty, nasty evil fey buggers.
Dark Elfs - They are Sidhe who entirely rebelled and took up serving the demonic powers rather than the angelic ones. They aren't purple in this world, the "Elfs" are the purple ones, these ones are white skinned with black or red hair. They have a tenuous alliance with Goblins since the two serve rival demon houses.
Trolls - Trolls once ruled the world, they were the ones who first emerged in force from Arcadia and overthrew the Draconian Empire within the lands that now make up the Valkrein Empire and drove them back to the furtherest reaches of the land. They ruled with brutal cruelty for a thousand years until the Sidhe came from the Arcadia and managed to break the Troll's hold on the world and curse them in a way that robbed most of their power and intellect and drove the rest into hiding within the elements
The normal D&D "Trolls" are Swamp Trolls which are the dumbest brute trolls and hardly representative of the rest of their species.
Forest Trolls are tall, agile creatures that have the appearance of knotted trees and work with the Wild Orcs, they are the weakest.
River Trolls are known for lurking under water, particularly near bridges where they grab people off the bridges and eat them. However, "River" Trolls are also found in the open sea where they have conqueered the Mermen and fight underwater wars agains the Draconian Empire's Kuo-Toa soldiers and other draconian forces.
Frost Trolls are found far, far to the north and travel south into the northern reaches of the Empire only during the dead of winter when the snowstorms are the thickest. They have thick white fur and blend in with the snow.
Stone Trolls are the nastiest and most powerful of the Trolls and lead armies of Morlocks (like Golliaths from the PHB2), twisted Dwarfs and other forces. They often mastermind alliances between the other races. However, Stone Trolls literally turn to stone if they are pulled out into direct sunlight until night falls, so they have to remain underground at all times or risk becoming vulnerable.
Divine Houses - There are 4 Divine Houses. Although they exist on another plane and the true rulers of these houses are effectively 'gods', the realms are a tangible place that one can wind up as and the upper eschleons are made up of very high level characters. If a higher powered creature from this plane is killed while on the material plane, they just get sent back to the palace of their appropriate house. So the Princesses of the Devil House and the Princes of the Beast House have been killed a couple times by the greatest champions and by each other on the material plane, but these deaths were not final and they returned for trouble again within a decade.
The first is the Angel House which is the house of light and is generally considered kind, forgiving, just and good.. though can just as easily be inflexible, wrathful and merciless. The house is highly bureacratic with no single clear ruler and they draw their energy from devotion. Divine power source characters tend to draw their power from this house. Humans who have been corrupted at birth, either through blood or from their mothers being infused with massive divine power, become Deva. Many Deva exist in the realm as servants for this house.
The second is the Devil House which rules over the things typically called devils, demons, etc. in D&D. The house is ruled over by a pair of twin princesses who can alter their appearance at will, but are invariably described as being beautiful and enchanting. One enjoys dominance and control while the other is rebelious and makes trouble. They draw their power both from devotion and from devouring souls. Arcane power sources often (but not always) draw from this house and users of arcane power are often corrupted and have their souls eaten which is why the Sidhe ban arcane items that they have not checked for demonic influence. Humans who have been corrupted at birth by this house are Tiefling.
The third house is the House of Beasts which rules over satyrs, minotaurs, rakasha, gnolls, lycanthropes, etc. It draws its power from pure emotion, rage, fear and passion particularly infuse this house with power. Primal Power Source characters tend to draw their power from this house. It is ruled by an older brother who is the avatar of war and appears as a red-skinned goat man and the younger brother who is the trickster 'god' and appears as a green-skinned, black-winged and long-nosed young man. Humans who have been corrupted at birth by this house are Beastmen (Shifters).
The final house is the House of Death which rules over all the various sorts of undead. It is ruled by the Lord of Death, but he has numerous powerful servants. The House of Death reaps the souls of the living and infuses dead bodies with pure black energy. Perhaps the most powerful of all houses, this house seems to be slowly and steadily gaining power and may be the one that will finally envelop the world. Shadow Power Source characters tend to draw their power from this house. Humans corrupted by power from this house are called Shadar-Kai.
In addition to the four houses, the divine plane also has tribes that have been transformed by the plane itself but with no particular influence from any of the four houses. These are the Gith and they serve as mercenaries and liasons for all four houses. Individually they may have preferances, but as a whole they do their best to remain neutral in the wars because they could not hope to mount a true defense against any of the houses.
Anyway, I like it a lot. Reworking the elves was a nice touch, especially the fall from grace and the pale-skinned "dark" elves. Since it's so heavily fey influenced, I'm surprised I didn't see a mention of the Fomorians. They're pretty standard in real world folkore about the Sidhe, and they aren't pleasant people there, either!
To the west, past the mountains where the Dwarfs and Trolls live, would be a vast desert where the main bulk of the Draconic Empire resides. The desert would form a natural barrier that would prevent the Sidhe (and Trolls before them) from mounting a real offense against the heart of the empire, so it is a safe haven for the Draconians to mastermind their offenses from. However, their forces and dragons themselves would be spread all throughout the land.
To the west would be a vast ocean, there could be some trading routes with mysterious foreign lands going on there, but the Mermen would be sinking a lot of the ships that tried to sail off to explore the world.
The northern reaches wouldn't be icy, you'd almost have to travel the entire length of the empire all over again to get to areas that were permafrost. However, those areas would have been prior Troll strongholds and so a lot of ruins can be found up there infested with Gnolls, Undead, Orcs and other nasty forces.
The empire itself would be fairly vast though since it contains many, many kingdoms. Although the population would be fairly agricultural, there'd be vast tracks of unclaimed land between each of the major cities and between the different kingdoms, the land use would be primarily centered around lakes or near forests. The cities would be relatively small and archiac, usually any given kingdom would only have one or two cities which would tend to be built around the major castle while fortresses would overlook outlying villages and doing their best to keep the farmers and villages safe from bandits and monsters. However, a strong tribe of Orcs and Forest Trolls would be quite capable of raiding and totally destroying most villages. This means there is a need for heroes and adventurers since the Sidhe couldn't really be relied upon.
The Fomorians in some aspects here have been replaced by the Stone Trolls in being the big, dark baddies who live in the deepest caves and mastermind the destruction of good in the world, however the Formorians themselves could certainly exist. I imagine they'd still be in Arcadia, in fact perhaps they were the ones who drove the Trolls and the Sidhe out of Arcadia and onto the material plane. This would mean Arcadia would be a dark and gothic plane under the rule of the Fomorians much like the one the Demon Houses reside on, making it a good source for adventures in the Epic tier.
I am really horrible with names and so I'm going to leave them as titles for now. Maybe later I'll find good names for the gods and goddesses.
The houses in this list are far longer standing than the individual gods or goddesses, there have been previous holders of their positions and even the oldest of the ones of the four houses came into being during the Troll Empire. There are four greater gods who are as old as the Celestial Dragon, but no one knows anything more about them and so devotees worship their children.
Although Trolls, Sidhe, Elves and Goblins are particularly tied to one of the deities, there is no direct link between the existence of the deity and their race. In Arcadia they had their own pantheons, but when they were driven out of their world they were disconnected from their previous pantheons and instead began to worship the gods of this world. The fey races seem to require a being to worship in order to stabalize themselves far more than less mystically-inclined races do and so these races tended to choose a deity and champion them while humans, dwarfs and even orcs are more evenly divided between the many deities. So, for instance, the Moon Goddess may be worshipped by most Elves, but she is not an Elf nor does she favor Elves above other races who would pay her equal homage.
Angel House
The Arbitrator - This god passes judgement upon mortal souls and saves those he feels are worth saving. None can harm those who he has vowed his protection to. He is the patron god for more Paladins. He tends to be potrayed as an aging, but physically powerful man with both the wisdom to make the right choices and the power to carry them out. He fights the other demon houses with a great zeal. He is also the favored god for most Sidhe.
The Matron/Healer - A motherly goddess whose followers try to bring peace and prosperty to the world. She sees all the intelligent races of the world as her children and tries to guide them. She is usually potrayed as a middle-aged woman with a very kind, noble and welcoming image. She is the patron goddess of most Clerics and other healers.
The Moon Goddess - Portrayed often as a girl, the moon goddess is the goddess of constantly rejuvenating youth and wisdom. She holds dominion over the forests and the seasons. Many Druids and Wardens worship her as do most (light) Elves.
Devil House
The Empress of Lies - The goddess of deceit, tyranny and selfish power, she is feared not for her force, but for how she can rally large groups to do her bidding. She encourages her followers to be opportunistic and greedy above all else so they can get ahead in the cut-throat world. She is usually portrayed as a young, beautiful, regal, but rather sinister and imposing demoness with large bat-shaped wings. She is the patron goddess of many wizards and spell swords, and many more serve her without realizing it. This goddess is the one the Dark Elves worship.
The Rebel - Though a twin of her sister, the rebel tends to be portrayed as (sometimes much) younger, more vibrant and more energetic. Her avatars tend to be young beautiful women with strange hypnotic red eyes, elongated canines, irresistable singing voices and unparralled dance ability. Although her seemingly softer and warmer image draws many more young people to her worship than her sister, she is perhaps even more twisted and cunning. Although most members of rival houses are considered to be at war, tales and stories about her suggest she has a close relationship to the Trickster god. She is the patron goddess of most Bards and Sorcerers.
Beast House
The War God - The most imposing of all the gods, the God of War likes to stir up battle upon the material plane and favors the most vicious, ruthless and rage-filled of warriors. He is the god from which Barbarians draw their power and many Fighters worship him as well. He has perhaps the most diverse following of any god as he seems to have delighted in creating various races at some point. Most Gnolls, Rakasha, Minotaurs, Lycanthropes and countless other beastial races worship him as well as most Orcs and Forest Trolls. He is portrayed as a large, red-skinned goat man somewhat similar to a minotaur.
The Trickster God - The younger brother of this house is seen as elusive and chaotic as the wind. He is called upon by many Shamans and most Rogues in the very least pay homage to him in tales. He is potrayed as a man with green skin, large black raven-like wings and a long beak-like nose, quite similar to the tengu who, along with the Goblins, seem to be his chosen people. He seems to a very fickle god with little rhyme or reason to his actions beyond creating chaos across the world. As explained above, there is a long standing connection with this god and the rebel goddess that seems to stem from a love for chaos.
The Undead House
The Lord of Death - Souls of mortals that are not saved by the Heavens or devoured or reincarnated end up in the possession of the realm of the dead. It is a dark, sullen place filled with torturous silence and devoid of any emotion. Its ruler is a man with blue pearl-white skin garbed in black. He is a god of infinate patience and infant cruelty. He seeks nothing more than the extinguishment of all freedom and life to create a new order of undeath under his power. Liches, Vampire Lords, War Ghouls, Necromancers and other "Shadow" people all worship him, the supreme ruler of nothingness. As the other houses wage war against one another, he makes his tediously slow, but unstoppable march towards total victory.
Others
The Celestial Dragon - A Liu Dragon of imposing power, the Celestial Dragon is the mother of all dragon-kind and, at least in the tales of the Draconian Empire, the creator of the world and all the sentient beings who arose from it. The Celestial Dragon does not ally itself with any of the four houses competing over the lives and souls of the mamallian races, but instead focuses on the destruction of all races that have pushed its children out of their homes and threaten to destroy them. Neither clearly good nor clearly evil, the Celestial Dragon's only concern is reasserting the dominance of its people.