To populate the land of Khand, I think that the Variags should be added. Not as regular inhabitants, but as mercenaries that can be hired to fight for a limited time. This may seem similar to the regular hired units of the mod, but the difference would be that the Variags would not fight to the death. They could perhaps be hired by players for other purposes. Maybe new and less experienced players can hire Variags as temporary bodyguards when traveling on roads. The reason why I am suggesting this way of implementing them is because Variag is a real life word that means mercenary people. The fact that Variag exists as a real word means that it is possible that Tolkien just simply wanted to use a more unique word than mercenary to describe some mercenaries from Khand. Due to being mercenaries, Variags would not exist as a faction, just simply as hirable mercenaries. Maybe more experienced players could hire them to hunt down other players.
Khand should also be populated by the Inhabitants of Khand, who would be the actual faction of Khand with structures and alignment. Khand would also be allies with Mordor, Rhudal, and the Gulflings.