How many factions are there?

The more, the better, as long as you don't forget about balance! And there are many examples to spark your imagination: instead of inventing absurd gnomes, we have mythologies: Scandinavians, Arabs, Egyptians, Mongols, Aztecs, Slavs, Chinese. And that's just scratching the surface. There won't be any problems with worldviews either. You can create light-aligned (but light-aligned people and light-aligned mages are very different), dark-aligned, neutral (intervening both ways), non-aligned (complete neutrality), chaos (total destruction), order (strict control), diplomatic neutrals (using whatever is convenient for them). By the way, we have another Saruman on our website! It's Aа340, of course. You'll be the third!