I just changed the race on my toon from wood elf to dark elf. I went to neriak and got attacked should the faction have trans so he is amibly to neriak and kele people mad at me.
I don't know if it works that way. I think you may need to grab one of the potions from the loyalty vendor to adjust your faction.
I think all the race change does is change your home city, your deity and, obviously, race. It allows you to wear race specific gear and you get the racial innate skills, but none of the toons I've ever race changed had their factions reset as far as I recall.
Like Red Dog, the only times I have used a race change, they have only adjusted race and not changed racial factions. I used the faction leveller thing from the loyalty vendor.
There is the straight math formula for faction hits youve done. And there are hidden flags, and there are race checks. The total sum is what gives you the /con message you see. So switching race may or may not be a big factor depending on faction.