Just found this interview. Apparently, it's a stand alone expansion.
EDIT: This is frickin' awesome. Man, I love these guys.
That's when he segues into describing Factions. "Factions is a stand-alone expansion for Guild Wars." he says. "Players will be able to purchase Factions and have a lot of fun with it without having to purchase the original game. Of course, those players who do have both will have the benefit of being able to cross back and forth between them, bringing items and abilities across and having access to much more content." Strain uses the card game Magic: The Gathering as a metaphor for the way ArenaNet sees the development of the Guild Wars franchise. "Magic: The Gathering keeps re-inventing itself with each new edition and players are never forced to buy older cards to stay competitive. They can always enjoy a one edition game -- Factions will do that for Guild Wars. What Factions-only players will miss out on is some of the richness that comes from mixing different editions together."
EDIT 2: Well, no raise on the level cap it seems. Though the article further explains that assassins will be able to dual wield and use stealth and the Ritualist is a big-time summoner. Plus, they said they plan on having two retail expansions a year, each with whole new areas, skills, campaigns and two new classes per.
It'd be really sweet if they did something like D&D has with the epic levels and/or prestige classes, but how they would, I don't know, since we're not constrained to the skills we can use. Any Warrior skill can be used by any Warrior, etc.