How many factions are there?

If the races are truly unique and well-developed, then you can have a hundred of them – the game won't suffer from it, IMHO. But if there's no originality, no "special touch," then it's better to have fewer races, but well-made ones. Although, of course, it's more fun to play with a large number of fantasy races, with a huge assortment of heroes and creatures, but without overpowered units. So, I'm in favor of creating new races :)
P.S. If you can come up with new, bright, and expressive elves, dragons, and other creatures, then they can be added too. (A very, very big IMHO – you can never have too many elves and dragons :) )