While I'm still new to this forum I've actually seen this exact same problem on a different Star Wars Role-Playing site a long time ago. The main problem for any group, and I think it's already been stated, is the "I'm Special Dilemma" with most characters. The larger a group gets the more a person, or group of people, therein want their views and opinions to be heard. Eventually tempers flare, either ICly or OOCly, and those that feel unappreciated splinter off instead of trying to work things out.
Now I personally like the idea of have The Jedi, a singular entity and powerhouse, but no matter what happens EVERY light-side force-using faction won't concede and merge factions even if most do. Most people, including myself, simply have to much pride to let something they build change into something unfamiliar and risk having no say in the after product.
Now the council idea is good, and could potentially stave off disaster from those feeling unheard, but then again 9/10 times things like this follow a pattern. Eventually that one guy/gal is going to garner more support, either OOCly or ICly, from faction members and become top dog even if unintentional. When that happens one of the supposed "Equal" Grandmasters is going to feel slighted and stir the pot.
The only way I can feasibly see governing a faction born of many others merging, is if the Grandmasters have equal say regardless of supporters in the faction. That would be the only way to keep the 'cool kid on campus' from swaying things his/her way. Then again if you do that you will have to contend with the moaning of the normal members who debate they should have more say.
All in all, regardless of what you do, it's going to be a long hard road. When looking at all this I can honestly say a blank slate and new faction seems the most likely to succeed, once all others are abolished.