Lack of a RP direction. Factions that aren't doing anything in game to achieve a long term goal.
It's okay to have it in your faction write-up, but if the only consequences of your factions ultimate goal are "shoot reds", it's kinda of a weak RP to me to get into.
What makes you log and long for faction interaction? (iRP and ooRP)
Ether active allies to contact and develop RP with, or active enemies to fight, and develop RP with.
Specifically, would you care to interact, support or play in a faction that specifically goes for supplying underdogs with at least an inch of morality? (That is, no slavery, no carda and stuff of that sort.)
You want to start a trading company that supplies outlaws, but without using the contraband commodities that those factions provide? (pretty much the only reason for trading with them).
I don't mind trading in game, I like to chat with people as I go by, but the reason I log my trader is to make cash, and make it reasonably efficiently within RP. I'm flying a passenger liner right now (25mil/20-30mins) and it takes ages to go through lanes. I'll say hi to anyone while i'm slowly strafing myself aligned, but i'm lucky if I get more than two lines of dialog out of them unless they want money.
I'd ask yourself who you imagine yourself RP-ing with and then log on and see if they're online now. There isn't any Dragons to RP with, because KNF don't randomly patrol. Same can be said of most separatist factions.
As for your other point. I really don't believe any faction starts with a "Drama Policy". What are you going to do if there is drama? if someone wants to RP their character unacceptably different to what you had in mind? by enforcing the "No-Drama Policy", you cause drama, at least for one person, if not more.
Factions are a turn off because they don't have enough people to interact with. I personally think they never began with anyone to interact with.
People need to look at factions in pairs(at least) and spend as much time developing their enemies as they do their own. No one "wins" from you having 5 times the members of the other side and showing up with 6 more caps then them. Both factions just get tired of wining or losing, and the faction position changes when the developers say so, regardless of your epic cap victory.