Each storyline will eventually lead to the endgame, and will make use of different NPCs along the way. People who would be friends in one playthrough will become enemies in other ones. Some NPCs are going to be surprised by who is and isn't on their side, and not everyone's going to make it out alive. You may not know the whole truth behind Daggerfall's storyline with one playthrough; only through playing with multiple factions will you get the whole story about everything that happened.
The decision of who to side with will follow a few introductory quests, like the Missing Prince and Morgiah's Letter. All questlines will end like the original main quest, with the choice between the various factions and the same final dungeon. Perhaps what you saw in your own faction wasn't very flattering, or perhaps they didn't want to reward you the way you expected, and your final decision goes to a faction you initially didn't like.