This is all sounding brilliant. I hope this project goes well!
here is my contribution of suggestions:
1) Play mercinary- not like in regular M&B, you should be able to go freelance with no allegences at all, do missions for all, assasinations, helping in battles ect ect. only making enemies with indiviual lords, and only making enemies with a faction if you repeatedly do missions against it.
2) Easier to make enemies with lords, and have conciquences. if a Lord hates you enough, he may send hit-squads after you, (even if he is in your faction, but obviusly he has to hate you more)
3) Make the factions very diferent in both visuals and gameplay- and if possible give each faction diferent tactics on the battlefield, for example- one faction may tend to do cavalry skirmishes, then bring in infantry. or another may prefer to hold ground with ranged attacks with a line of infantry for defence.
4) Naval battles have been used in other mods, they would work brilliantly in this, but replacing longboats for massive steam-ships (meybe even in the sky?)
5) GUNS! can be awsome, but can allso be overpowered massively- and can make bows/crossbows useless. allthough with this mod, i assume there wont be any bows.
6) this is a wild suggestion that would be awsome, but is probably impossible- what if, instead of- or as well as horses, you have steam-machines like in Final Fantasy 6. Big walkers that stand about double as high as a soldier, slow but with a massive amount of health.
7) final one, a story for each empire, when you join them, you dont automaticaly become a lord. make it so you have to work yourself up through the ranks doing missions- preferably unique missions, not 'collect taxes' ect ect. and once you have become a lord, it would be good to have some interaction with the other factions- make there be a reason for each faction to declare war on each other, so you have some kind of insentive to fight them rather than just being told 'they are the enemy'.
phew, thats all

feel free to ignore as much of that as you like!
EDIT: reading about that army of zombies comming from an ancient evil? - zombies are a tad overdone and get boring quick, but... what if it was somethink a bit Cthulhu-ish (cant spell it) some dark magical force that no-one knows anything about, and you will never know anything about. just lots of wierd monsters (nothing typical, the wierder the better) and insane cultists, you can join them by swearing alliegence to them. (like the cultists in the Chthulhu stories/game). oh, and if you betray them, you should realy watch your back
EDIT (again sorry P

- The 'reds' underground faction sound great, what I think would work best in my opinion would be if they start out with no settlements, or meybe just one or two hidden away somewhere. but make unhappy and poor villages create troops that wander the map like bandits, but only attacking enemies of the Reds. occasionaly the villages will spawn Lords, who will be able to attack castles and cities, so as the game progresses so will the rebellion.
in whatever the main empires capital will be, you could put a secret Red base, where you can get missions and recruit Red troops if you wish to work for them secretly. it would be awsome if you could do secret missions that gain you freindship for the Reds, but dont make the empire hate you (unless you are caught of course) that way you could be an Empire Lord who secretly supports the resistance