Of course, you could always use a word filter. But this can be both frustrating and impractical; thus counter-productive. Designing a system that is not easily abused could become a cumbersome task. However, I do have an idea.
You could make cross-faction communication optional for the player. I feel that the source of most flaming comes from the fact that the players are no longer divided by the faction barrier. Perhaps this is why World of Warcraft implemented this measure? It is a competitive game for sure. Here is a quote from wowwiki.wikia.com
I rest my case."The ability for player characters to learn additional languages was planned early in World of Warcraft but was not developed, likely due to the tendency of cross-faction communication to be insulting and profane. It seems unlikely that this functionality will ever be added."
Implementation:
I've noticed that under languages in the skill tab, there is only one language; common.
Perhaps if there were two languages each character could speak. Three in total, to clarify. One could be the Horde's common, one the Alliances common, and then of course cross-faction common. You wouldn't need much more than a script to unlearn the cross-faction language, and there are multiple languages in the game which you could use as the basis for each factions respective common.
Really I thought this was going to be a much longer and in-depth post, but I feel like that pretty well sums it up. Thoughts? Did I miss something?
