When my interent connection was cancelled for 3 days i decided to play WC3 & TFT to kill time and while iI was playing I found the answer to how naga changed into so many different creatures.
Naga were of the HighBorne and they were smashed to the bottom of the sea after the sundering. somehow, they survived being smashed to the bottom of the sea and dwelt magically on the ocean floor. Overtime, the magic that ran through their veins mutated and warped their elven bodies to adapt with their new environment. and so you guys know, azshara lives in the form of a 20ft octopus like being. her lower body is that of an octopus while her torso is serpentine like and her face amost as beautiful as she was while as an elf. her hair however is replaced with snakes. (medusa-esque).
If they had naga, I think the they would have to create a new faction, and implement another playable race, and seeing how Blood elves and Naga have sided with Illidan who is doing the bidding of Kil'Jaenden ( I think that was the demons name) there would be alot of controversery of who these races would be sided with. Then again we can break it down a bit. Blood Elves hate Humans for their lack of respect towards them. Naga does the bidding of Illidan so they are more of a goblin type (whoever has more money is the winner) Illidan supposedly deceased in combat against Arthas at the battle of The Frozen Throne (According to our GMs our bad boy is back from the grave and is the most bad ass mofo the game has to offer). Illidan has been said as the most powerful NPC in the game for a very long time, but has recently been brought up again.
Kil'jaeden is factioned with the scourge whom is apposed to all Forsaken Undead (the Undead race in WoW that you can play) and their allies.
Where would the races of the third faction start? All the spare space in kalimdor and the eastern kingdoms have been used up with contested territory, and the levels of each contested territory are balanced throughout the whole world. There would never be enough space for more friendly territory.. let alone 3 for 4 races..Rumors are the 3rd factions will be made up for Naga, Blood Elves, Draeni, and Saytr. There are other races others feel have a better shot, but those are the most common I see. You never know Ogres or Goblins might join them in future history of WoW but as of now the best bet is those 4 races listed.
The pandarans are currently very mysterious. Little is known about them, or at least it might be just me that knows little of them. They have a hidden city somewhere called Pandaria...and they are excellent business men. And on a side note: I like pandarans. =)