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In my opinion, the third installment had a pretty optimal number of factions – it was interesting, and the choice was large. But what I like more in the fifth game compared to the third is that the Dwarves were separated from the Elves (this is a BIG plus, because Dwarves living in forests is a bit wrong, in my opinion!). And the Dungeon should be restored, although Minotaurs could be left as slaves of the Dark Elves, and Twilight Dragons should also be included (after all, they worship Malassa, and without Twilight Dragons, it would lose all meaning, and what would happen to the existing campaigns where dragons play a rather large role?). And Trogloids, Medusas, Harpies, and Manticores could be placed in a separate Castle, possibly adding new units to them. And I would really like to see an Elemental Castle with Phoenixes, although I can hardly imagine how to upgrade Elementals... :( And Orcs have never been my favorite race, so it's not so important to me whether they will be included or not... I just don't like barbarians!
In general, summing up and counting the races, we come to the conclusion that 8-9 would be just right!