[trevius]

I don't recall seeing anywhere that items are factored into faction at all. Here is where bonuses are calculated for factions, but it currently only seems to add spell bonuses:

// EverHood - Faction Mods for Alliance type spells
void Mob::AddFactionBonus(uint32 pFactionID,sint32 bonus) {
    map <uint32, sint32> :: const_iterator faction_bonus;
	typedef std::pair <uint32, sint32> NewFactionBonus;

	faction_bonus = faction_bonuses.find(pFactionID);
	if(faction_bonus == faction_bonuses.end()){
		faction_bonuses.insert(NewFactionBonus(pFactionID,bonus));
	}else{
		if(faction_bonus->second<bonus){
			faction_bonuses.erase(pFactionID);
			faction_bonuses.insert(NewFactionBonus(pFactionID,bonus));
		}
	}
}

sint32 Mob::GetFactionBonus(uint32 pFactionID) {
    map <uint32, sint32> :: const_iterator faction_bonus;
	faction_bonus = faction_bonuses.find(pFactionID);
	if(faction_bonus != faction_bonuses.end()){
			return (*faction_bonus).second;
	}
	return 0;
}