Terra Nova has an interesting discussion on matter of choosing sides: Horde/Alliance in WoW. Castranova asks why do people choose to play evil beings, like undead, prompted by the fact that he discovered that he scares his three-year-old son by it. The post got so many responses I gave up on them, but I did get interested.
I can't answer for Edward Castranova, I can only say what I have learned about conflict in role-play, through playing and through research. And yes, I do know about the issues concerning my own rationalisations, read the parts of my thesis about reflexivity, don't think I haven't faced those questions. But back to the Horde/Alliance conflict.
1) Games need a conflict in order to expand. They need "the other side". Yes, orcs, undead and trolls indicate evil, but if nobody played them, the game would collapse, just like democracy would collapse if nobody dared to represent the opposition.
2) Democracy is based on the right to diversity. OK, so the diversity in WoW is a little extreme and the diet of the undead not exactly compatible with the diet of the taurens, but there are a lot of things I don't eat, too. And I have eaten whale meat, which I guess by some are considered the equivalent of the dead bodies of humanoid enemies. So playing the dark side is, to many of the players, a real moral choice: the choice of representing the alternative, the option to the traditionally accepted "good" side.
3) I have a son too. He is 17 years old and had played WoW for months before I started a character. He sat next to me while I learned how to play my orc, and told me how to deal with the game. His main character is a night-elf priest, and he started to play at the alliance side because he thought they were the heroes. The disappointment when he discovered that he went straight into a long tradition of betrayal, in normal human "God is with us" style, was enough to make him roll a tauren, for some serious tree-hugging.
4) Blizzard is playing with the stereotypes. Yes, the names and imagery of the different races play up to stereotypes. Stereotypes strike both ways, they restrict as well as set free.
5) My personal demons: I can't play humans. My version of hell is a pretty, well-organised human society where the deviant are wiped out. Just logging in as a human character, against that sunny, pretty background, I feel uncomfortable. Give me the graveyeard of the undead any time, chaotic, falling apart and openly rotten/rotting. I might be able to play a gnome if I loaded up enough irony, or a nightelf with a heavy dose of selfrighteousness and detachment, but otherwise the stereotypes just get me: ordinary human organisation is the source of real evil. Sadly and very realistically, people don't see evil in what looks more like themselves.
6) One of the commenters on Terra Nova pointed out that the horde-side players go out of their way to be polite and helpful. While I agree on that on certain servers, I think that is more server-based than side-based. What we get are different cultures on different servers. Moonglade (rp-server) horde-side has a very different dynamic from Argent Dawn (rp-server), more like Alliance side on Runetotem (normal server). The players appear to be younger and used to normal servers or pvp servers, and get rude and unpleasant when they are exposed to role-play. I'd like to say that horde-players are nicer, but after a couple of weeks on a new server, I am really not sure. On the other hand - Moonglade is a young server, it has very few high-level characters (the price on light hide is ridiculously low and it still doesn't sell), and no strong, agenda-setting guilds. Moonglade can still shed the "fuk u" responses to role-play and grow up. Culture can develop and become different.
My conclusion to this is: The reason I like WoW is that Blizzard acknowledges the stereotypes Castranova points out, and then plays with them. The backstory of the game does what the game invites the players to do: play with assumptions.