What TK version would Dark Age Legends, the Fall of Romme, use?
TK3, preferably we wait until the next version before we start making boards and such (maybe just planning, concept and graphic making)
How are we going to have the player choose their alliance?
Either we have at the beginning of each chapter the player choose what character they want to play as. Or have the custom character and they'll choose at the start if they wish to be with the Dark Empire, Romme Kingdom or be Rouge. However throughout the story they'll be given the choice to switch sides about mid chapter 1 (Like how Duilin went from the Empire to Romme and Sigilus went from Rouge to Dark Empire).
Should players have alignment-based spells? (just a thought)
No actually. Duilin and Zeros' use a lot of evil-like spells (ie: life draining, hell spawn techniques) but they're mostly shown as the good guys.
Will players be able to CHOOSE their spells as they level up, instead of just leveling up and getting standard spells?
Yes.
Will players be able to CHOOSE their class?
I'd rather have them choose their Race. They should just build their own 'class' as they level up.
Will players be able to pick new abilities as they level up? (Starwars KotoR equivalent is feats)
Personally I think all RPGs need that now-a-days.