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In my opinion, the Necropolis is the coolest faction – they lose few troops (eternal slavery + raising the dead + necromancy) and can easily turn enemy creatures into their own... By the way, it feels like cheating... They should at least charge money for each transformation...
Humans are pretty good; they have cool troops, offer good skills to heroes, and you can raise units – when you have a safe town somewhere behind you, it's quite enough to upgrade peasants into archers, and maybe even a few swordsmen into monks.
The Academy is, in my opinion, terrible. I've liked mages since the second game, but they're too weak here... the hero levels up Knowledge instead of Combat Skills, but he already has archmages. And the units (in general) deal too little damage. Gargoyles are just awful; they can only absorb damage and prevent archers from shooting, and even Djinn aren't much better – they die immediately. No mini-arts can save them.
Dark Elves are cool, but I don't play as them.
I don't like Demons. In general, they're okay, but they have too few archers; although this is compensated by summoning and the speed of Nightmares and Cerberuses.
I play the Elves the most:) I've always liked them:) And they fit my favorite tactic – "keep the enemy at a distance and attack from afar" (it's a simple tactic, I know, it doesn't work well in HoMM 5, so sometimes I have to come up with such tactical tricks! oh dear:) ): Ents hold the enemy, and archers attack from a distance; although usually, they can only hold one or two units:(
But in general, the Wood Elves are definitely not the coolest