I like it. If I'm reading this correctly, what happens with TC though? If each town has a faction, then in theory that faction should be able to keep its town safe. (Except Redding, because apparently they don't know how to organize themselves with the fight between Reno, VC and NCR from F2).
Jumping off your idea, this could be an opportunity to make TC more interesting. The player faction controlling the town would have to work with those already signed up with the town's faction. Members of a town's faction are somewhat permanent. Meaning they don't leave every 24 hours when the town changes hands. They can always fight for their town and get rewarded when they win. But the player faction is much more disposable. I say that if in these battles a TC town is involved, and it loses, town control opens up. So say XXX faction controlled Modoc. At YYY time Modoc and Den have a battle. If Modoc loses, that faction loses control as well. The members of the town faction, however, lose nothing.
But we can't leave people out of this. Lets say you are an enemy of XXX faction but do not belong to Den's faction. You want to see XXX lose. So you go to Den, and you sign up as a temporary militia. There would have to be a cutoff, like you have to sign up at least 2 real hours before the battle. If you win, you would be rewarded, as well as getting the chance to take over Modoc, but lose nothing if you lose. Every day, the town fights are between different places. (Maybe even see the Enclave attacking a town if the same faction keeps it for too long?) So instead of TC simply being run to a sheriff's office and fight everyone off there could be some strategy.
Battles should, however, not be fought in the town, but in an area slightly outside of town. The defenders get a slight headstart to set up mercs, (mines if they become available) etc.
After the battle opens, members have one chance to enter. If they are killed, the area disappears to them like it does when you leave a faction. After some amount of time, whichever side has more members left (even if one side only has one man) wins. Winners are returned to town with their rewards in their inventory (locker if they are town members) and losers are left to wander the wastes (or return to their town to defend it from attackers). After the battle, the losers have 1 ingame hour before their town hears word of the failure, kicks them out as reigning player faction, and searches for a new replacement. If the losers manage to retake the town, they do the same thing again the next day and hope they win.
Oh and I think players should get a choice to be armed by the town or bring their own. If they are armed by the town, their inventory is replaced by an armor, a gun (players choose their specialty and get a low-mid quality gun of that type) and an appropriate amount of ammo. Winners should keep this, a few caps, and maybe another item as a reward for winning.