It seems to me that the favor system has been largely dead for over a year and a half. What I want to do here is generate some ideas that can be added to the system. What I would want to stay away from is something that provides a clear advantage to a player with favor. No 36pt builds for toons with 2500 favor. Here are a few things off the top of my head:
Opt out of Korthos and get XP to bump you to lvl 2. - Qualifier: 2 toons each with at least 1k favor.
Clicky with 1 charge per rest of Teleport to Marketplace - Coin Lords favor. (you could do this with teleports to the various houses based on their individual favor as well)
Ability to open a certain quest up to elite without having done it before - Specific faction favor (on any toon on account or just on the active one).
Token of unbinding (unbind an item that you had previously bound to you via ritual - NOT raid loot).
Token of unmaking - (recover certain percent of larges from an item)
One of the things I shoot for is things that will keep the DDO long term player interested and eliminate a bit of the grind. I don't want to do things that make one player uber just because they have favor but conveniences go a long way in any game. These are just some thoughts off the top of my head. I would be interested to hear yours.