By now I've played FE with every faction/race and I have to say that while factions are overall nicely done, there are huge disparities in quality amongst races, i.e. no pre-built faction can match the power of a custom faction. These are obviously my personal feelings, so take them for what they are: personal.
A. The leaders.
The ability to train Henchmen and +10% XP is POWERFUL. Considering that henchmen are immortal and that they can be specialized and outfitted with spare weapons, there's nothing that they can't take on. For the race of Men regular trained units are optional. In fact, with a henchmen-only strategy one only needs Mana, Gildar and Influence. LOTS of Mana, Gildar and Influence. Trade all that metal, all the Crystal, Horses, Wargs for Gildar, and you're a powerhouse. As an added bonus, factions of Men can be either a Kingdom or an Empire. I believe that Men are the most powerful race in FE
The Altar faction is extremely well designed and plays to the Men's strengths.
First of all let me say that I do not like the Berserk ability, it is a weak one imho. The real Trog strengths are of course +20 Weight allowance and Juggernaughts. Trogs in a custom faction can really dominate the game, as opposed to the one-dimensional combat-only focus of the Yithril. Being able to effortlessly armor the normal troops in full plate is great, and Juggernaughts can be customized to become truly fearsome engines of destruction. Strong Troops + Juggs provide a solid foundation for an army that supports Mage Champs and/or staff troops.
The Yithril faction imho does not do justice to the Trog race. Lack of ranged weapons is a crippling weakness, and a custom Trog-based faction would do much better.
These guys are badasses. +1 HP per level is Huge, 30 Magic Resist is great, Golems are okay. The reason why I think that Trogs are better is twofold: it's easier for Trogs to wear full plate without having to ride a horse, and because with Trogs you can actually have a caster Sovereign. The Ironeer +50% Tactical spell cost weakness is downright crippling as far as spellcasting goes. If you ignore combat magic completely, then Ironeers are better than Trogs, but because magic is such a huge part of the game, I believe Trogs edge the Ironeers out.
The Gilden faction goes reasonably well with the Ironeer strengths, although the Great Hammers ability is kinda iffy: Ironeer troops will already be groaning under the weight of all that plate, and adding a warhammer and a heavy shield would kill their initiative.
Slaves are great. They're cheap to produce and they don't cost any maintenance, so you can have plenty of them very early. Slave Scouts early on can really open up the map in a hurry without incurring costs. Slaves of course are substandard in combat (with -4 Initiative being their greatest drawback), but they're still very useful. The proper Quendar troops are also good: the +50 Resist fire > -50 Resist Frost, as Fire damage is sooo prevalent both in spells and in unit abilities. Troops that are totally immune to things like Fireball and dragon's breath are nothing to sneer at.
The Magnar faction does a reasonable job of capturing the Quendar strengths in the form of the Flesh Bound Tome. Both Cull the Weak and Death Lash are great spells early on, turning the fodder troops into walking Health+Mana potions for the Sovereign and the Champs. The Slave Lord ability is imho underpowered. There are better ways for the Quendar race to spend two picks (such as a combo of Defensive and Lucky).
B. The Average Joes
These guys almost have enough of unique and interesting strengths to be among the best. Almost. Masters of survival, with increased defenses at below 50% health and the ability to fortify tiles in tactical combat the Krax really go a long way to maximize their staying power on the battlefield. The Faction traits of the Kraxis Empire complement the Krax race really well (Defensive is a godsend).
+1 Accuracy per level, ability to build roads, access to Warhorses and Bazaars make Mancers above average, but lacking a unique solid strength around which one could base a strategy. Warhorses mean that Plate clad late game Knights are a good way to go, but one can do that even without warhorses. The Capitar Faction traits of indestructible caravans and Civics play well into the economic game, while Lucky amplifies the Mancer accuracy to unprecedented levels.
7. Urxen and Tarth
Both are imho equally average and rather similar. The Tarth do offer a stronger opening game (+3 Attack AND +3 Ini is huge early on for a small army), but later on their racial ability becomes non-existant, while the Urxen get their racial ability later (but it persists until the end). Their respective factions do a good job of playing into their racial strengths (especially with the Urxen), but their overall racial abilities are easily outshined by most other races.
C. The Gimps
8. The Amarians
These guys aren't terrible, but they certainly aren't great. Their -1 HP/Level penalty is harsh, while amongst their racial strengths only the +Initiative from the Air Shards is notable, but even that is contingent on the map layout for most of the game. The Pariden faction goes a long way to ameliorate the Amarian weaknesses as the Enchanters/Decalon combo is a mighty one, but by the same token just about any other race can do a better job with the same faction features.
9. The Wraiths
Bad, just bad. The -1 HP/Level and for what? A minor HP gain per kill + a minor mana gain per kill as a unit design feature. Seriously? Not good, not good at all. The Resoln is a good faction, but it is in no way due to the Wraith racials.