As long as the regional reputation is working as intended, i.e. when I kill someone in the Khurite region I lose Khurite standing, then I don't see the issue with this system from a PvP perspective? Henrik has said multiple times that this system is in place to promote more regional conflict amongst groups. Just don't shit where you eat, basically. However, for this system to FULLY work as, how I think, they intend then there should be no rep loss for killing a blue who currently has negative standing in whatever region you are in. That way if I see a guy in the wild that I know is part of a guild who terrorizes my region, then I should be able to smoke him without penalty.