I apologize if any of my past or future criticisms may have came off as hostile or condescending. @tolgayurdal I respect your proposal and the amount of thought and time you put into it, despite my different views on Smaug. However I feel that I should have expressed this before, but my fear would be by placing so much emphasis on Smaug or the Balrog, the rest of the aspects of the faction like the monsters, the unique mechanics, or even the other heroes. Will become overshadowed as a result, making the Misty Mountains feel less like a culmination of different types of orcs/goblins, monsters and the like. And instead a faction that revolves entirely around Smaug and the Balrog. Don't get me wrong, Smaug and the Balrog are cool as hell. And they are a staple of LOTR and the Hobbit in both the books and the films.
But one of the biggest appeals to me about the Misty Mountains faction is seeing some of the more obscure monsters in the Legendarium get their chance to shine on the battlefield. To me, by making Smaug and the Balrog that prominent, and putting so much attention to them, that myticisim, that concept that makes the faction special, gets lost.
Don't get me wrong, the Balrog and Smaug being faction leaders can totally work, but I would prefer to have more attention on the various monsters (I.E different types of trolls, dragons, wargs etc.) that make up the misty mountains, or heck even the unique types of orc and goblin troops from Moria, Gundabad, and Goblintown. Get the attention they deserve.
@dkbluewizard, I thought about this concept for a while, but the more I think about the intricacies of the Misty Mountains factions in the lore. More and more I think it should have a similar system to the Dwarves, where the player can choose from one of two, if not three factions. With the other two factions being able to come to their aid. Your point is very much valid.