I agree that Fate should play a greater role in the Young Kingdoms but, not at the expense of player agency. I think there's two aspects to this. Plotting a campaign arc and the character's possible destiny, which might be a mutual activity of the player and the GM; and a mechanical aspect. Fate as a mechanic of some sort. It should also be separate and distinct from any allegiance system. I wonder if Fate should replace luck in some manner? There's a brilliant independent game called Agon about playing Greek heroes, and it had a Fate mechanic. You eventually "maxed out" on the trait and meet your Fate. I think that's one approach. Using Fate to replace say, a pool of luck points to change dice rolls, etc. could be another. Fate might be something that cannot be replenished. Eventually, you can't influence the random elements, and you "meet your Fate", though this sort of mechanic tends towards dice rolling outcomes as opposed to roleplaying outcomes. Maybe the GM even sets the tiers of Fate for the characters, with lesser heroes having fewer Fate points, while great heroes and companions to heroes having significantly more?
Part of what separated Stormbringer from most Fantasy role-playing settings is the distinctions between nationalities. Especially Melniboneans. Who didn't want to be Melnibonean? We all know from experience with the game's previous editions that the random generation was a mixed blessing; on one hand, it gave us more variation in adventuring groups, on the other, clear character imbalance. Any changes that allows for more control over character creation runs the risk of creating nothing but parties of sorcerers, of if there's complete control of the nationality/race selected; a party of Melnibonean sorcerers.
Allegiance is an awkward element. I think Allegiance requires a certain amount of awareness. An understanding of the greater Cosmic Struggle that the average Tarkeshite sailor isn't attuned to or aware of. He worships as he does because that's part of his culture and affects his daily life. Then there's a character who's more "in the know", understanding the Cosmic Struggle and the forces at work in the multiverse, and purposively taking a side. I think allegiance should address both of these sorts of characters. Basically, a high allegiance score shouldn't have a mechanical effect unless a character has purposively made the allegiance clear or known, consciously acting towards one of the Cosmic Powers: "an agent of chaos" etc.