PVP in H&H would be pretty good if it was faction based, here are some pros:
-it's been used successfully in WOW, DAOC, WAR, and SWG
-it largely does away with griefing
-makes pvp fun and constructive
-if you just use a FFA model it will end up a big grief fuck fest like UO and AC
-would give classes like this a legitimate use (fighting other factions) rather than griefing
-it would make town placement actually matter (in the strategic context of your faction) instead of just building anywhere and everywhere in huge loose groups with no defence
PVP in H&H right now is the same as it is in UO, so I don't see how it can ever be more than just a bunch of griefers or big groups going around raping towns and individuals who aren't prepared to defend themselves.
With factions there should be mechanics that let towns/factions organize battles, ex. town A in the butt faction declares that it will siege town B in the dick faction in 24 hours. Then people could fight meaningful fun pvp at their full strength and resources. If any town could just go siege another town instantly it would virtually always be a rout since noone would be ready to defend it- yea it kinda sucks for your sandbox model but it's a game so you have to compromise. If you wanted to declare attacks of less severity like a raid where people can only steal stuff, it would give appropriately less notice, say 12 hours.