Outlaw should be on everyone for the pvp server.
I agree with Hater. It's a PvP server. People should be rewarded for PvPing, not penalized.
If you wanted a full time pvp server there would need to be some system in place for guild alliances or something because say you are in guild X and you are fighting with guild Y against guild Z, since there would be no way to distinguish what your spells hit and what they dont it would end up being a complete mess.
Make it a toggle. Toggling it off is instant in safe zones (excepting recent PvP) or the current internal cooldown when not.
Done.
If they do anything the flagging system should be a more fluent action. It seems to take about 1.5s to flag which can make a person skittish if they think you are there to drop them.
The flagging system is there on PvP servers to allow other people to assist another player in trouble without having to party them.