I kinda like the idea. However this is what I have to say:
In regards to the theme, I'd say something like a WW2 era, or current era type of setting, OR have it be steampunk.
Also, if we WERE to do this, we should do it with more than one race so as to really have differences on a baser level for the factions (An example would be the WORLD of Highschool DxD [Not the plot though, egh] as it has several overall factions: The Angels, The Fallen Angels, The Devils, The Humans, The Mages, and all the other pantheons of gods, etc.). Plus it's fun to see that stuff to me.
Also, I actually have a story that works in similar idea in a few areas. It's this story called Parallel on Wattpad. It's by a pretty amazing, if little inexperienced by the seemings of things writer that goes by Renoe_K. Interesting story actually.
However, even with all that put together, it would work similar to how LoL has it's IC mechanics: You go out, you fight, you die, you get revived/respawned, you repeat, one side wins in the end.
It has merit, but it needs a World to go WITH that merit. If you want, I can see if I can think up anything so we have a backup or something to do while we wait for each other's posts and shit.