Faction reputation in WoW exists primarily as an alternate currency / reward mechanism these days. Similar to badges, it is something that you accrue at a gradual pace, in the course of pursuing (generally) more powerful but more random loot. You might run an instance 17 times before it finally drops that awesome new weapon, but it's okay because you're also gaining the faction points which you'll eventually need to enchant your helmet, too!
In a certain respect, this is good. WoW has very successfully woven a large number of currencies together (honor points, badges, PvP tokens, reputation, cash, etc) to create several presumably parallel progression paths. There is a flip side to this, however, which comes with mudflation. As the rewards from these alternate forms of currency begin to outstrip those provided by the primary vehicle for attaining them, you end up with the consolation prizes becoming the ultimate goal. In WoW, one need look no further than the level 232-264 loot from badges, which are aquired from instances dropping 187-200 loot.
When this happens, the original content becomes sidelined, and often trivialised. It turns into a mindless grind instead of an engaging and relevant part of the character progression curve (which should generally reflect a loosely exponential growth in time investment : power increase ratio as power increases). Catch up mechanisms are important, but they need to be curtailed to prevent them blowing out into full on overtaking mechanisms.
Using factional reputation as a gear distribution mechanic is still a good idea, but its relevance to P:V13 will vary, I think, based on how important gear ends up being. Fallout 1 & 2 I think had a pretty good balance between gear and level based power, despite only really utilising 2 gear slots (3 if you count ammo).
Factions in P:V13 I think would definitely be an excellent idea. The Brotherhood of Steel is perhaps one of the coolest / most intriguing organisations I've seen in a computer game. That said, the decision on whether to pair these factions with a pseudo-currency reputation is one that will have to be considered carefully within the larger context of the game. There are pros and cons for both its inclusion and omission, and I'm sure it will be discussed extensively internally at gamesas before we see the final result
Maybe you'll sit and sigh, wishing that I were near
Then maybe you'll ask me to come back again
And maybe I'll say "Maybe"