I'd be surprised if the face system in BL worked hugely different to the one in Warband.
How it works:
You have sliders that control parts of the face, and a randomizer that just picks values on said sliders.
You can set certain limits for that randomizer to be applied for "skins", which can be used for races, factions etc.
For all these sliders you set two extreme examples per one skin, and then every person sharing that skin is generated between those two extremes.
I think BL works very similarly, so when you choose a Khuzait main character, it automatically gives you a random value set between the Khuzait limits. (flat face, low profile nose, slanted eyes etc.)
To get less "ugly" NPCs is a trivial thing, you just need to restrict slider extremes that lead to "ugliness" for NPC skins/types. Or you need to limit how many of them can get into extreme values at once.
Of course this will lead to less unique faces overall.