Step 1: Rule out the impossible
First of all, you have to remember, there are just some things you cannot do. Just like in real life, you cannot simply put on plastic ears, announce to your coworkers that you are an elf, and expect them to speak to you in Thalassian. In WoW, you cannot create a gnome and walk around telling people you're a goblin – it will not work and no one will take it seriously. It doesn't matter how cool it would be, it's just not what people see when they look on their screen, and people generally have a difficult time believing things when they eyes tell them very clearly that it just isn't so.
Step 2: Avoid the impractical
Whatever kind of antagonist you make (or any character for that matter) must be one of the established player character races in the game, preferably of your own faction. You could make it a member of the opposite faction if you really wanted to, but you would lose all ability to actually communicate with everyone in your group of friends. The worst you could do is scare them with emotes and maybe some awesome PvP, if you're really good at that sort of thing. If you just happen to have a high-level character leveled up and decked out in PvP gear that could lay waste to any number of casual gamers, then by all means, whip him out and set him against your friends from time to time. In the end, however, there should be some sort of story there, which is hard when all you can do is emote or attack. Having some friends who can "translate" for you via external Instant Messenger service of some sort might help, or once Battle.net 2.0 comes out, you may be able to use its ability to do cross-faction communication more extensively for roleplaying as well (though exactly how this will work remains to be seen). Either way, it's probably best for now to stick to one of the races on your own faction, in order to allow more subtlety than mere emotes can allow.
Step 3: Beware the implausible
Finally, it's important to remember that whatever sort of villain you create should make sense. Avoiding mary-sueism is very important here, of course -- you want to make sure your character isn't an "attention getter" so much as he or she is a dynamic element in your group's roleplaying experience. Especially if you want to play this character as a part of your guild's story for a lengthy period of time, it's probably best to go for a subtle, indirect approach. Think, "antagonist" instead of "evil villain dude" -- focus on what you know best, such as the intimate details of your friends' characters' backstories, habits, or goals, and think of something that would be a snug fit for them. Stay away from ideas like "invincible demon-spawn bent on exterminating your guild," and work together with other guild members to create something more personal:
- Ex-girlfriend of one guild member trying to forget his past
- Troubled youth trying to rebel against authority figures (like guild officers)
- Absent-minded archaeologist who keeps discovering cursed items that get the guild in trouble (for example, a statuette that turns certain people into gibbering idiots for a time, or a non-soulbinding helmet that erases memories).
All these characters are not your typical fantasy villain archetypes, but what they lose in epic fantasy flair, they gain in playability. These characters can be just good enough that your guild might want to keep them around a while, and yet bad enough that they can be convincing antagonists in a number of situations. Sometimes the best villain is simply a flawed hero. Step 4: Muahahahaha! (to be continued)
This can be disappointing, however, if what you really wanted was a hardcore struggle of good versus evil. Sometimes the stories about our characters can feel more like soap operas or childish misadventures than actual fantasy storytelling, and you need something to change things up a bit. So next week, we'll discuss how to make a truly evil bad guy within these established limits of possibility, practicality, and plausibility. There's one particularly nasty cliché to avoid, as well as a few other problems to be aware of, but as long as you understand what you're doing, you and your guild can have a great time with a fantasy adventure of your own making.