Oh I see.... it was changed when the RBAC system was implemented..
as you can see here:
Code:
bool allowTwoSideAccounts = !sWorld->IsPvPRealm() || HasPermission(RBAC_PERM_TWO_SIDE_CHARACTER_CREATION);
It is allowed if the account has permission to create an alliance and a horde character, so you will need to give every player permission, I am not familiar with the RBAC system so I can't help you with setting that up, but with the help of the documentation found
here I bet you can fix it yourself.