Hard-Coded is the clear choice, regardless of which direction you take to setup the rest of the ruleset.
Any teams concept needs to have clearly defined teams with clearly defined opponents to really be successful. I didn't personally play on any of the EQ teams servers, but thus far I've heard a) How horrible it was to have soft-coded team 'exploiting' making PvP difficult and b) How amazing the hard-coded teams were for bringing these communities together for meaningful PvP encounters.
So lets go with hard-coded. And avoid the A/B/C teams selection at character select. I want my team selection to be a meaningful choice, whether it's based on the alignment I want to follow or a grouping of deities or races. Those will get me really thinking about the character I want to create and how I will interact with the game world. Clicking "B" just because it's in the middle, without any idea of what that B team will consist of, where my teammates might be generally located, or even who will be with me just seems...boring.
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