It seems I've lost track of the conversation a bit. Let's go through it step by step and in more detail, because it's not clear what we're talking about in just a few words:
1. Rebalancing existing Factions - which ones? It seems that the decision regarding Factions from different mods has already been made. Taking the "Holy Mission" approach to rebalance any set of creatures from ncf with color correction of textures in Photoshop, or working with unfinished pre-alpha graphical assets, doesn't appeal to me (if anything, in theory, you could even balance squares with the inscription "I am a level 2 creature" and create new Factions, but in my opinion, Heroes 5 has a quality standard, and new Factions should meet it). If we're talking about the original ones, the balance in TE generally suits me, except that the Orcs and Necropolis are extremely strong in the late game, but this is a feature of their mechanics, and the only thing that could help is removing the free converter to undead and nerfing Blood Wrath (but here, we need to figure out if it's possible to do this without access to the executable code, which I personally don't have).
2. Alliance as a separate Faction without any undead - what is meant by this? As far as I know, in RTF, the Alliance is replaced by Free Cities, and there is no undead there. In Chaos Theory, it's a reskin of the Alliance with the replacement of several units with new ones, and there is no undead there either.
Chaos Theory does have undead. The Necropolis upgrade has been replaced.