Depending on how they set up entering the instance I can see them having some problems with the 2 sides working together to accomplish the side quests instead of fighting.
What do you mean? My understanding was whoever completes the sidequest first gets the reward (Ice Demon/etc), and whoever didn't gets the shaft on it and gets raped by whatever monster is granted to the opposite faction for the completion.
I know DAMN well the Alliance aren't going to help us summon an Ice Demon to rape their ranks.